About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

36 JREG Bulletin 1 (2018-2019)

handle is hein.journals/jregb36 and id is 1 raw text is: The Modigliani-Miller Theorem at 60: The Long-Overlooked Legal Applications of Finance's Foundational Theorem Michael S. Knollt 2018 marks the sixtieth anniversary of the publication of Franco Modigliani andMerton Miller's The Cost of Capital, Corporation Finance, and the Theory ofInvestment, which purports to demonstrate that a firm 's value is independent of its capital structure. Widely hailed as the foundation of modern finance, their article is little known by lawyers and legal academics even though it led to many major economic advances, such as agency costs and asymmetric information, recognized and used throughout the law today. The legal profession's lack offamiliarity with these Nobel Prize-winning authors and their work is not merely an oversight; it is a missed opportunity. When inverted, the Modigliani-Miller theorem describes the mechanisms through which capital structure can affect value. This reverse Modigliani-Miller theorem provides a powerfulframework that can be extremely useful to legal academics, practicing attorneys, and judges. Introduction ................................................. 2 I. History .................................................... 3 II. Ivy Halls: Use by Legal Academics and Policy Makers..................... 8 A. Positive Analysis .................................. 8 B. Prescriptive Analysis. .................... .......... 10 C. Summary. ............................ ........... 12 III. Wall Street: Use by Practitioners ..................... ..... 12 A. Training Lawyers. ........................... ..... 12 B. Practice ............................. ........... 15 C. Summary. ............................ ........... 17 T Theodore Warner Professor, University of Pennsylvania Law School; Professor of Real Estate, The Wharton School; Co-director, Center for Tax Law and Policy, University of Pennsylvania. Thanks to Alvin Dong for assistance with the research, to my colleagues for their comments and suggestions, and to my students for their willingness to grapple with many of these issues. Copyright 2018 by Michael S. Knoll. All rights reserved. 1

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most