The Modigliani and Miller Theorem and Market Efficiency
AbstractMost of the recent literature on risk management and capital structure assumes that markets are perfect, i.e., efficient and complete. This paper presents anecdotal evidence that suggests that different capital markets (e.g., debt, equity and warrants markets) may not be perfectly integrated, and discusses the implications of this lack of integration on financing strategies. I argue that although models that assume perfect markets are sufficient to explain cross-sectional differences in financing and risk management choices within an economy, that issues relating to market conditions may be necessary to explain differences in these choices across countries and across time.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8641.
Date of creation: Dec 2001
Date of revision:
Note: AP CF
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Franklin Allen & Douglas Gale, .
"Arbitrage, Short Sales and Financial Innovation,"
Rodney L. White Center for Financial Research Working Papers
10-89, Wharton School Rodney L. White Center for Financial Research.
- Oliver Hart, 2001.
NBER Working Papers
8285, National Bureau of Economic Research, Inc.
- Oliver Hart, 2001. "Financial Contracting," Harvard Institute of Economic Research Working Papers 1924, Harvard - Institute of Economic Research.
- Andrei Shleifer & Robert W. Vishny, 1995.
"The Limits of Arbitrage,"
NBER Working Papers
5167, National Bureau of Economic Research, Inc.
- Andrei Shleifer ad Robert W. Vishny, 1995. "The Limits of Arbitrage," Harvard Institute of Economic Research Working Papers 1725, Harvard - Institute of Economic Research.
- Fama, Eugene F., 1984. "The information in the term structure," Journal of Financial Economics, Elsevier, vol. 13(4), pages 509-528, December.
- Hellwig, Martin F, 1981. "Bankruptcy, Limited Liability, and the Modigliani-Miller Theorem," American Economic Review, American Economic Association, vol. 71(1), pages 155-70, March.
- Guedes, Jose & Opler, Tim, 1996. " The Determinants of the Maturity of Corporate Debt Issues," Journal of Finance, American Finance Association, vol. 51(5), pages 1809-33, December.
- Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
- Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
- Stiglitz, Joseph E, 1969.
"A Re-Examination of the Modigliani-Miller Theorem,"
American Economic Review,
American Economic Association, vol. 59(5), pages 784-93, December.
- Hovakimian, Armen & Opler, Tim & Titman, Sheridan, 2001. "The Debt-Equity Choice," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(01), pages 1-24, March.
- Barclay, Michael J & Smith, Clifford W, Jr, 1995. " The Maturity Structure of Corporate Debt," Journal of Finance, American Finance Association, vol. 50(2), pages 609-31, June.
- Stohs, Mark Hoven & Mauer, David C, 1996. "The Determinants of Corporate Debt Maturity Structure," The Journal of Business, University of Chicago Press, vol. 69(3), pages 279-312, July.
- Avanidhar Subrahmanyam & Sheridan Titman, 1999. "The Going-Public Decision and the Development of Financial Markets," Journal of Finance, American Finance Association, vol. 54(3), pages 1045-1082, 06.
- Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
- Brick, Ivan E. & Ravid, S. Abraham, 1991. "Interest Rate Uncertainty and the Optimal Debt Maturity Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(01), pages 63-81, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.