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Academic literature on the topic 'Miller and Modigliani's statements'
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Journal articles on the topic "Miller and Modigliani's statements"
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Brusov, Peter, Tatiana Filatova, Natali Orekhova, Veniamin Kulik, She-I. Chang, and George Lin. "Generalization of the Modigliani–Miller Theory for the Case of Variable Profit." Mathematics 9, no. 11 (June 3, 2021): 1286. http://dx.doi.org/10.3390/math9111286.
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For the first time we have generalized the world-famous theory by Nobel Prize winners Modigliani and Miller for the case of variable profit, which significantly extends the application of the theory in practice, specifically in business valuation, ratings, corporate finance, etc. We demonstrate that all the theorems, statements and formulae of Modigliani and Miller are changed significantly. We combine theoretical and numerical (by MS Excel) considerations. The following results are obtained: (1) Discount rate for leverage company changes from the weighted average cost of capital, WACC, to WACC–g (where g is growing rate), for a financially independent company from k0 to k0–g. This means that WACC and k0 are no longer the discount rates as it takes place in case of classical Modigliani–Miller theory with constant profit. WACC grows with g, while real discount rates WACC–g and k0–g decrease with g. This leads to an increase of company capitalization with g. (2) The tilt angle of the equity cost ke(L) grows with g. This should change the dividend policy of the company, because the economically justified value of dividends is equal to equity cost. (3) A qualitatively new effect in corporate finance has been discovered: at rate g < g* the slope of the curve ke(L) turns out to be negative, which could significantly alter the principles of the company’s dividend policy.
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Brusov, Peter, and Tatiana Filatova. "The Modigliani–Miller Theory with Arbitrary Frequency of Payment of Tax on Profit." Mathematics 9, no. 11 (May 25, 2021): 1198. http://dx.doi.org/10.3390/math9111198.
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The main purpose of the current study is the generalization and further development of the Modigliani–Miller theory taking into account one of the conditions of the real functioning of companies for the case of paying income tax with an arbitrary frequency (monthly, quarterly, semi-annual or annual payments). While a return is not required more than once a year, businesses may be responsible for filing estimated taxes based on profits earned. This requirement is dependent on showing a profit. For example, sole proprietors must file estimated taxes on profits quarterly, on the 15th day of April, June, September and January. In Russia, tax on profit payments could be made annually, quarterly, or monthly. We suppose, that more frequent payment of income tax impacts on all main financial indicators of the company and leads to some important consequences. We use analytical and numerical methods: we derive all main formulas of the modified Modigliani–Miller theory theoretically and then use them to obtain all main financial indicators of company and their dependences on different parameters by MS Excel. We show that: (1) all Modigliani–Miller theorems, statements and formulas change; (2) all main financial indicators, such as the weighted average cost of capital (WACC), company value, V, and equity cost, ke, depend on the frequency of tax on profit payments; (3) in the case of income tax payments more than once per year (at p≠1), as takes place in practice, the WACC, company value, V and equity cost, and ke start depend on debt cost, kd, while in ordinary (classical) Modigliani–Miller theory all these values do not depend on kd; (4) obtained results allow a company to choose the number of payments of tax on profit per year (of course, within actual tax legislation): more frequent payments of income tax are beneficial for both parties, for the company and for the tax regulator.
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Philomina I, Udobi,, and Iyiegbuniwe, Wilfred I. "A Test of Miller and Modigliani Dividend Policy Irrelevance Theory in Nigerian Stock Market." American Finance & Banking Review 2, no. 2 (June 13, 2018): 1–13. http://dx.doi.org/10.46281/amfbr.v2i2.132.
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This study empirically tests for the validity of Miller and Modigliani’s dividend irrelevance proposition in the Nigerian Stock Exchange (NSE). Secondary data were obtained from the Nigerian Stock Exchange fact book and firms’ annual audited financial statements for fifteen years (2001-2015). Mediation Analyses, was used to measure the direct and indirect effects of dividend on stock price. Correction of the anomalous use of current dividend and current earnings by the use of naive expectation of dividend and earnings revealed that the direct effect of expected dividend on share price is significant but the indirect effect of expected dividend on share price through earnings is not significant. The implication of these results is that expected dividend has its unique (direct) effect on share price beyond the effect on share price which it shares with expected earnings (indirect effect). This conclusion suggests that dividend policy is relevant in valuation of shares in NSE. It was therefore recommended that company management should treat dividend as an active corporate finance decision-making variable and should employ dividend in information signalling to capital market investors.
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Jonathan, LCA Robin, and Theresia Militina. "PENGARUH STRUKTUR MODAL TERHADAP PROFITABILITAS DAN NILAI PERUSAHAAN PADA PERUSAHAAN BATUBARA YANG GO-PUBLIC DI INDONESIA." Research Journal of Accounting and Business Management 3, no. 1 (July 1, 2019): 97. http://dx.doi.org/10.31293/rjabm.v3i1.4219.
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This study aims to analyze and determine the effect of the projected capital structure in the leverage ratio on profitability and company value in coal companies that go public in Indonesia in 2013-2015 both directly and indirectly.With the improvement in the selling price of coal today, it is a breath of fresh air for coal mining companies to start their activities. The decision on the proportion between debt and equity is very important. Modigliani and Miller said that the use of debt would be more profitable than the capital itself. The main objective of financial management is to maximize the value of the company. From managed business activities, profits are obtained. The problem is whether the capital structure has a significant effect on profitability and firm value. The development of coal mining companies in Indonesia has good prospects because it is very much needed for the energy industry by generating electricity with coal. The mining and mining service companies listed on the Indonesia Stock Exchange in 2013-2015 were 42 companies and 23 of them were coal mining companies whose financial reports were examined at the same time period. This study uses path analysis with cross section data and secondary data types in the form of financial statements published on the Indonesia Stock Exchange. The results of the study show that directly, capital structure has no significant effect on profitability and has a negative and significant effect on firm value. Profitabitas has no significant effect on firm value. Indirectly, profitability has no significant effect in mediating the relationship of capital structure to firm value.
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Bhattacharya, Sudipto. "Corporate Finance and the Legacy of Miller and Modigliani." Journal of Economic Perspectives 2, no. 4 (November 1, 1988): 135–47. http://dx.doi.org/10.1257/jep.2.4.135.
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[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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Ross, Stephen A. "Comment on the Modigliani-Miller Propositions." Journal of Economic Perspectives 2, no. 4 (November 1, 1988): 127–33. http://dx.doi.org/10.1257/jep.2.4.127.
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[This is a comment on “The Modigliani-Miller Propositions after Thirty Years” by Merton H. Miller in this same issue.] What a treat it is to have the opportunity to read Merton Miller's ruminations on the MM Propositions. A comment on Miller and Modigliani's work can easily become a discussion of any facet of modern finance. I will focus on the two areas of arbitrage and taxation. Since the original MM analysis, economists have learned an enormous amount about the role played by no arbitrage conditions in financial markets. Taxation is where the real world meets the theory. At first blush, the corporate deduction for interest seemed to doom the MM analysis to an academic curiosity, since it appeared to give debt an obvious cost advantage over equity. It was the genius of Miller to see that the arbitrage analysis went much too deeply into the workings of the financial markets and the economy as a whole to be easily unseated by even something as powerful as the tax code.
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Lucky, Lucky Anyike, and Uzokwe Grace Onyinyechi. "Dividend Policy and Value of Quoted Firms in Nigeria: A Test of Miller and Modigliani Irrelevant Hypothesis." Australian Finance & Banking Review 3, no. 2 (October 5, 2019): 16–29. http://dx.doi.org/10.46281/afbr.v3i2.404.
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This study tested Miller and Modigliani dividend policy irrelevant hypothesis in Nigeria. The objective was to examine the validity of the irrelevant hypothesis. Tobins Q measure of market value was modeled as the function of dividend payout ratio, retention ratio, dividend per share and dividend yield. 20 firms were selected on the basis of availability of information necessary for conducting the study and the readiness of annual financial reports for the period of 10 years from 2008-2017. Cross sectional data was sourced from financial statement and annual reports of the firms. Based on the analysis of fixed and random effect results, random effect was used. The study revealed that 75 percent variation on the market value can be predicted by variation on independent variables in the regression model. The beta coefficient of the variables found that all the independent variables have positive and significant relationship with market value of the selected quoted firms. The study concludes that dividend policy is relevant as oppose to the irrelevant hypothesis of Miller and Modigliani. Its therefore recommend that managers should manage their dividend policies effectively since it is relevant and has significant effect on market value and optimal dividend policy which implies policy of trade-off between dividend payout and retain earnings should be well managed and investors should have adequate knowledge of dividend policy of quoted firms that will correspond with their investment objectives of avoid conflict in dividend policy.
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Ramalingegowda, Santhosh, Chuan-San Wang, and Yong Yu. "The Role of Financial Reporting Quality in Mitigating the Constraining Effect of Dividend Policy on Investment Decisions." Accounting Review 88, no. 3 (January 1, 2013): 1007–39. http://dx.doi.org/10.2308/accr-50387.
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ABSTRACT Miller and Modigliani's (1961) dividend irrelevance theorem predicts that in perfect capital markets dividend policy should not affect investment decisions. Yet in imperfect markets, external funding constraints that stem from information asymmetry can force firms to forgo valuable investment projects in order to pay dividends. We find that high-quality financial reporting significantly mitigates the negative effect of dividends on investments, especially on R&D investments. Further, this mitigating role of financial reporting quality is particularly important among firms with a larger portion of firm value attributable to growth options. In addition, we show that the mitigating role of high-quality financial reporting is more pronounced among firms that have decreased dividends than among firms that have increased dividends. These results highlight the important role of financial reporting quality in mitigating the conflict between firms' investment and dividend decisions and thereby reducing the likelihood that firms forgo valuable investment projects in order to pay dividends. Data Availability: Data are available from public sources identified in the paper.
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Masera, Rainer, and Giancarlo Mazzoni. "On the non-neutrality of the financing policy and the capital regulation of banking firms." Studies in Economics and Finance 33, no. 4 (October 3, 2016): 466–87. http://dx.doi.org/10.1108/sef-09-2014-0179.
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Purpose The paper aims to investigate whether the value of banks is affected by their financing policies. Higher capital requirements have been invoked by exploiting a renewed edition of the Modigliani–Miller (M&M) theorem. This paper shows the limits of this claim by highlighting that the general statement that “bank equity is not expensive” can be misleading. The authors argue that market prices should play an important role in bank supervision. Expectations of future profits in prices supply timely information on the viability of a bank. Design/methodology/approach The authors use the Merton model to show the inapplicability of M&M theorem to banks. The long-run viability of a bank is analyzed with a dividend discount model which allows to compare a bank’s long-term profitability with its overall cost of capital implicit in market prices. Findings The authors show that the M&M framework cannot be applied to banks neither ex-ante nor ex-post. Ex-ante the authors focus on government guarantees, ex-post they emphasize the risk-shifting phenomena that may increase the overall risk of the bank. The authors show that a bank’s stability cannot be achieved if the market expectations of its future profits stay below the cost of funding. Research limitations/implications The authors use simple analytical models. In a future study, some key peculiarities of banks, such as the monetary nature of deposits, should be analytically modelled. Practical implications The paper contributes to the debate on capital regulation on the level of capital requirements and the instruments to assess the viability/stability of banks. Originality/value This paper uses simple models to assess analytically the key issues in the debate on banks’ capital regulation.
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Hussemann, Jeanette, and Jonah Siegel. "Decision-Making and Holistic Public Defense Post-Montgomery v. Louisiana." Criminal Justice Policy Review 31, no. 6 (August 30, 2019): 886–907. http://dx.doi.org/10.1177/0887403419871601.
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In 2012, the U.S. Supreme Court ruled in Miller v. Alabama that mandatory sentences of life without the possibility of parole (LWOP) for youth are unconstitutional. In 2016, the Court held in Montgomery v. Louisiana that the ruling in Miller should be applied retroactively. Drawing from qualitative interviews with justice actors, and individuals who were sentenced to LWOP as juveniles and paroled, this article examines the implementation of Miller-Montgomery in Michigan, the factors that influence decisions to release juvenile lifers, and their reentry process. In doing so, we focus specific attention to the role of publicly appointed defense attorneys and the application of holistic defense practices to support Montgomery case mitigation and juvenile lifer reentry. Findings indicate that institutional disciplinary and programming records, emotional wellness, statements by victims’ family members, political considerations, and reentry plans are key considerations when deciding whether a juvenile lifer should be eligible for parole.
Dissertations / Theses on the topic "Miller and Modigliani's statements"
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Van, Zyl Cecilia J. "Maatskappybesparing en die investeringsbesluit." 1998. http://hdl.handle.net/10500/17786.
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The share of corporate saving in total saving in South Africa has increased during the past four decades. In this dissertation various economic theories are examined in order to try to explain this change and to determine the possible implications of this change. The conclusion is that the relationship between the investment decision of companies and their savings decision is governed by the determinants of the financing choice of firms. These include cost, risk, control and availability. If, because of these factors, firms prefer to
finance investment with retained earnings, there is a relationship between investment and the level of corporate saving. The degree to which the investment decision is dependent on the availability of internal
financing will determine the importance of the level of corporate saving in a country.Oor die afgelope vier dekades het die aandeel van maatskapybesparing in die totale besparing in Suid-Afika toegeneem. In hiersie vehandeling word veskillende ekonomiese teoriee ondersoek ten einde hierdie verandering te probeer veklaar en te probeer vasstel wat die implikasies van hierdie veandering is. Die gevolgtrekking waartoe gekom word, is dat die verband tussen die investeringsbeleid en die maatskappye se besparingsbesluit bepaal word deur faktore wat die finansieringskeuse van die firmas beinvloed, naamlik koste, risiko, beheer en beskikbaarheid. Indien hierdie faktore daartoe lei dat die maatskapye verkies om investering met terruggehoue bespaaring the finansier, is daar 'n verband tussen investering en die vlak van maatskappybesparing. Die mate waarin die investeringsbesluit afhanklik is van die beskikbaarheid van interne finansiering, sal bepaal hoe belangrik die vlak van maatskappybesparing in 'n land is.
Economics and Management Sciences
M.Com.
Books on the topic "Miller and Modigliani's statements"
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Archer, Simon, and David Alexander. Miller European Accounting Guide. 3rd ed. Harcourt Professional Publishing, 1998.
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