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Is Capital Structure Relevant? An Empirical Examination Of Capital Structure Choices, William R. Pratt

Theses and Dissertations - UTB/UTPA

Modigliani and Miller propose a scenario in which capital structure becomes irrelevant. To achieve the condition of capital structure irrelevance, Modigliani and Miller have to assume market frictions such as taxes, information asymmetry, and other factors do not exist. With the acknowledgement of such forces, capital structure irrelevance does not hold and we are left with the question “why do firms finance the way that they do?” Within this dissertation I address this very question. Chapters one and two provide an introduction and review of the extant literature. Chapter three examines data over a period of 1970 to 2010, with …