The Modigliani-Miller Theorem
نویسنده
چکیده
... with well-functioning markets (and neutral taxes) and rational investors, who can ‘undo’ the corporate financial structure by holding positive or negative amounts of debt, the market value of the firm – debt plus equity – depends only on the income stream generated by its assets. It follows, in particular, that the value of the firm should not be affected by the share of debt in its financial structure or by what will be done with the returns – paid out as dividends or reinvested (profitably).
منابع مشابه
The macroeconomics of Modigliani-Miller
We examine the validity of a macroeconomic version of the ModiglianiMiller theorem. By this we understand that different equilibrium capital structures have no impact on the allocation of commodities and on welfare. We develop a general equilibrium model with two production sectors, riskaverse households, and financial intermediation by banks. Banks are funded by deposits and (outside) equity a...
متن کاملOn the Pricing of Contingent Claims and the Modigliani-miller Theorem*
A general formula is derived for the price of a security whose value under specified conditions is a known function of the value of another security. Although the formula can be derived using the arbitrage technique of Black and Scholes, the alternative approach of continuoustime portfolio strategies is used instead. This alternative derivation allows the resolution of some controversies surrou...
متن کاملSecurity Interests, Misbehavior, and Common Pools
The Modigliani-Miller Theorem on the irrelevance of corporate capital structure is perhaps the best-known result in modern finance. Simply put, the theorem states that, under certain assumptions, the market value of a firm is independent of its capital structure. Under the stylized assumptions of the theorem, substituting equity for debt or adding layers of debt to the capital structure of a fi...
متن کاملAsymmetric Information
Asymmetric information, as the adjective indicates, refers to situations, in which some agent in a trade possesses information while other agents involved in the same trade do not. This rather self-evident premise has nevertheless revolutionized modern economic thought since the 1970s. Take, for example, two major results in the economics and finance literature, the first fundamental theorem of...
متن کاملTesting the Modigliani-Miller Theorem of Capital Structure Irrelevance for Banks
Some advocates of far higher capital requirements for banks invoke the Modigliani-Miller theorem as grounds for judging that associated costs would be minimal. The M&M theorem holds that the average cost of capital to the firm is independent of capital structure, because any reduction in capital cost from switching to higher leverage using lowercost debt is exactly offset by an induced increase...
متن کامل