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

U of Penn, Inst for Law & Econ Research Paper No. 17-43

21 Pages Posted: 17 Oct 2017 Last revised: 3 Dec 2018

See all articles by Michael S. Knoll

Michael S. Knoll

University of Pennsylvania Law School; University of Pennsylvania Wharton School -- Real Estate Department

Date Written: 2018

Abstract

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

Knoll, Michael S., The Modigliani-Miller Theorem at 60: The Long-Overlooked Legal Applications of Finance's Foundational Theorem (2018). Yale Journal on Regulation Bulletin, Vol. 35, Pg. 1, 2018; U of Penn, Inst for Law & Econ Research Paper No. 17-43. Available at SSRN: https://ssrn.com/abstract=3053953

Michael S. Knoll (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-6190 (Phone)
215-573-2025 (Fax)

University of Pennsylvania Wharton School -- Real Estate Department ( email )

Philadelphia, PA 19104-6330
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
212
Abstract Views
880
rank
142,817
PlumX Metrics