The Modigliani and Miller Theorem and the Integration of Financial Markets

Financial Management, Vol. 31, No. 1, Spring 2002

Posted: 18 Mar 2002

See all articles by Sheridan Titman

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Abstract

Most of the recent literature on risk management and capital structure examines settings where the markets for different securities, (e.g., debt, equity, and derivative markets) are perfectly integrated. This paper presents anecdotal evidence that suggests that financial markets often are not integrated and discusses the implications of this lack of integration on corporate financing strategies. In particular, I argue that "market conditions," which are determined by the preferences of individuals and institutions that supply capital, can have an important effect on how firms raise capital and the extent to which they hedge.

Suggested Citation

Titman, Sheridan, The Modigliani and Miller Theorem and the Integration of Financial Markets. Financial Management, Vol. 31, No. 1, Spring 2002. Available at SSRN: https://ssrn.com/abstract=300526

Sheridan Titman (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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