The Modigliani-Miller Theorem at 60: The Long-Overlooked Legal Applications of Finance’s Foundational Theorem

Authors

Michael S. Knoll, University of Pennsylvania Carey Law SchoolFollow

Document Type

Article

Publication Date

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

Publication Title

Yale Journal of Regulation Bulletin

Publication Citation

35 Yale J. Reg. Bull. 1 (2018)

Repository Citation

Knoll, Michael S., "The Modigliani-Miller Theorem at 60: The Long-Overlooked Legal Applications of Finance’s Foundational Theorem" (2018). All Faculty Scholarship. 1936.
https://scholarship.law.upenn.edu/faculty_scholarship/1936