The Modigliani-Miller Theorem at 60: The Long-Overlooked Legal Applications of Finance's Foundational Theorem
Yale Journal on Regulation Bulletin, Vol. 35, Pg. 1, 2018
21 Pages Posted: 17 Oct 2017 Last revised: 3 Dec 2018
Date Written: 2018
2018 marks the 60th anniversary of the publication of Franco Modigliani and Merton Miller’s The Cost of Capital, Corporation Finance, and the Theory of Investment. Widely hailed as the foundation of modern finance, their article, which purports to demonstrate that a firm’s value is independent of its capital structure, is little known by lawyers, including legal academics. That is unfortunate because the Modigliani-Miller capital structure irrelevancy proposition (when inverted) provides a framework that can be extremely useful to legal academics, practicing attorneys and judges.
Keywords: Law and financial economics, economic theory, corporate finance, arbitrage, debt, equity, leverage, Modigiliani-Miller, reverse M&MI, legal practice and education, deals, transactions
JEL Classification: B26, G32, K22, K34
Suggested Citation: Suggested Citation