Paying out cash on hand should reduce the share price, because money in the bank is proportionally owned by the shareholders.<p>For an extreme example, imagine a hypothetical company with 1 billion shares outstanding and $1B in the bank and no other business than earning interest on its cash.  With $1B in the bank, it should be valued at $1/share plus some share of expected future interest payments.  Pay out a $1/share dividend, and the company is now worth $0.