The Modigliani and Miller Propositions: The History of a Failed Foundation for Corporate Finance?

17 Pages Posted: 17 Sep 2014

Date Written: September 2014

Abstract

The Modigliani and Miller (MM) propositions provide a foundation for corporate finance theory. Nevertheless, this paper argues that their adoption has led to a disengagement of such theory from the humanity of business, as well as, more broadly, from concepts of corporate strategic management. As a result, the context within which textbooks allow corporate investment and financial decisions to take place is severely distorted from reality. The paper argues that we require the context of behavioural and strategic corporate management if we are to accommodate the reality of business, the behaviour of formalised groups, and an ethical dimension to business.

Keywords: Capital structure, Corporate finance, Dividends, Investments, Modigliani and Miller propositions

Suggested Citation

Dempsey, Michael J., The Modigliani and Miller Propositions: The History of a Failed Foundation for Corporate Finance? (September 2014). Abacus, Vol. 50, Issue 3, pp. 279-295, 2014, Available at SSRN: https://ssrn.com/abstract=2497228 or http://dx.doi.org/10.1111/abac.12030

Michael J. Dempsey (Contact Author)

Ton Duc Thang University (TDTU) ( email )

District 7
Ho Chi Minh City, 3001
Vietnam

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