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Property Rights and Corporate Finance

Author

Listed:
  • Graff, Richard A.

    (Electrum Partners L.L.C.)

  • Kairys Jr., Joseph P.

    () (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

We examine a central result in corporate finance – the Modigliani-Miller capital structure irrelevance proposition – from a Coasian property rights perspective. Building upon the work of Coase, Demsetz and Cheung, we develop an enabling methodology to study the impact of positive Coasian transaction costs. When the Modigliani-Miller assumption of default-free debt is relaxed in the analysis of corporate leverage, either long-lived transaction costs related to property rights must be explicitly assumed away, or long-lived transaction costs related to property rights must be incorporated into the analysis.

Suggested Citation

  • Graff, Richard A. & Kairys Jr., Joseph P., 2005. "Property Rights and Corporate Finance," Working Papers in Economics 174, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0174
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    File URL: http://hdl.handle.net/2077/2745
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    References listed on IDEAS

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    4. Merton H. Miller, 1989. "The Modigliani‐Miller Propositions After Thirty Years," Journal of Applied Corporate Finance, Morgan Stanley, vol. 2(1), pages 6-18, March.
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    Cited by:

    1. Graff, Richard A. & Kairys, Jr. Joseph P., 2005. "Property Rights, Risk and Leverage," Working Papers in Economics 183, University of Gothenburg, Department of Economics.

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    More about this item

    Keywords

    property rights; transaction costs; capital structure;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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