Articles to Look Over.
Chirinko, R., Singha, A., 1999. Testing static tradeoff against pecking order models of
capital structure: a critical comment. Emory University Working Papers, ’99 – ’00.
Dybvig, P., Zender, J., 1991. Capital structure and dividend irrelevance with asymmetric
information. Review of Financial Studies 4, 201– 219.
Jensen, M., Meckling, W., 1976. Theory of the Firm: Managerial Behavior, Agency
Costs and Ownership Structure. Journal of Financial Economics, pp. 305-360.
Mayer, C., Sussman, O., 2002. A new test of capital structure. Saïd Business School,
University of Oxford.
Miller, M., Modigliani, F., 1958. The cost of capital, corporation finance and the theory
of investment. American Economic Review, 261 – 297.
Miller, M., Modigliani, F., 1959. The cost of capital, corporation finance and the theory
of investment – a reply. American Economic Review, 655 – 669.
Miller, M., Modigliani, F., 1965. The cost of capital, corporation finance and the theory
of investment – a reply. American Economic Review, 524 – 527.
Myers, S., 1977. Determinants of corporate borrowing. Journal of Financial Economics
19, 147– 176.
Myers, S., 1984. The capital structure puzzle. Journal of Finance 39, 575 – 592.
Ross, S., 1977. The determination of financial structure: the incentive signalling
approach. Rand Journal of Economics, p. 23.
Shyam-Sunder, L., Myers, S., 1999.Testing static tradeoff against pecking order models
of capital structure. Journal of Financial Economics 51, 219 – 244.
Warner, J., Watts, R., Wruck, K., 1988. Stock prices and top management changes.
Journal of Financial Economics 20, 461– 492.
Weisbach, M., 1993. The CEO and the firm’s investment decisions. Journal of Financial
Economics 37 (2), 159– 188.
Yermack, D., 1997. Good timing: CEO stock option awards and company news
announcements. Journal of Finance 52, 449– 476.
Author Info
Stephen A. Ross
Abstract
The Modigliani-Miller theorem on the irrelevancy of financial structure implicitly
assumes that the market possesses full information about the activities of firms. If
managers possess inside information, however, then the choice of a managerial incentive
schedule and of a financial structure signals information to the market, and in competitive
equilibrium the inferences drawn from the signals will be validated. One empirical
implication of this theory is that in a cross section, the values of firms will rise with
leverage, since increasing leverage increases the market's perception of value.
Publisher Info
Article provided by RAND in its journal Bell Journal of Economics.
Volume (Year): 8 (1977)
Issue (Month): 1 (Spring)
Pages: 23-40
Handle: RePEc:rje:bellje:v:8:y:1977:i:spring:p:23-40
Keywords: