This paper investigates how dividend policies affect a firm value according to complex interactions of different market imperfections or firm characteristics. We consider the level of information asymmetry, agency problems, corporate governance, a firm’s stage in its life cycle, transaction costs, and irrationality of investors to show how firm value and dividend policies are related with respect to these factors. We find that dividend payout increases firm value in general and much more when the agency problem is severe. However, we find that dividend payout becomes irrelevant to firm value under specific situations; with high level of information asymmetry, with strong corporate governance, or in early stage of its life cycle. The results provide an answer to the question of why some extant empirical studies argue that dividend is relevant and others not.