MM, Coase, and Corporate Finance

Harry DeAngelo and Jonathan M. Karpoff

♦ Despite cosmetic similarities, the Modigliani-Miller and Coase Theorems provide conceptually distinct insights for analysis of corporate financial policy and governance that are driven by different economic considerations, with neither theorem a special case of the other. This paper details the substantive differences between the two theorems and the distinct lessons each provides for research on corporate finance and governance issues.

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