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Journal of Economic Perspectives: Vol. 2 No. 4 (Fall 1988)

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Corporate Finance and the Legacy of Miller and Modigliani

Article Citation

Bhattacharya, Sudipto. 1988. "Corporate Finance and the Legacy of Miller and Modigliani." Journal of Economic Perspectives, 2(4): 135-147.

DOI: 10.1257/jep.2.4.135

Abstract

[This is a comment on "The Modigliani-Miller Propositions after Thirty Years" by Merton H. Miller in this same issue.] The influence of the Modigliani-Miller (1958) propositions on capital structure and the Miller-Modigliani (1961) theses on dividend policy permeates almost all aspects of financial economics to this day. In this commentary, I shall focus on the influence of Miller's and Modigliani's contributions on a couple of key areas in corporation finance, and review research progress by later contributors. Broadly speaking, these two themes can be summarized as: (A) integrated tax- and information-related considerations in capital structure and dividend policy choices; and (B) the impact of inflation and nominally denominated debt contracts on the valuation of corporate equity.

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Authors

Bhattacharya, Sudipto (Unlisted)

JEL Classifications

521: Business Finance

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