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Capital Structure: Modigliani–Miller Theory

  • Peter Brusov
  • Tatiana Filatova
  • Natali Orekhova
  • Mukhadin Eskindarov
Chapter

Abstract

Under the capital structure, one understands the relationship between equity and debt capital of the company. Does capital structure affect the company’s main settings, such as the cost of capital, profit, value of the company, and the others, and, if affects, how? Choice of an optimal capital structure, i.e., a capital structure, which minimizes the weighted average cost of capital, WACC, and maximizes the value of the company, V, is one of the most important tasks solved by financial manager and by the management of a company. The first serious study (and first quantitative study) of influence of capital structure of the company on its indicators of activities was the work by Modigliani and Miller (Am Econ Rev 48:261–297, 1958). Until this study, the approach existed (let us call it traditional), which was based on empirical data analysis.

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Copyright information

© Springer Nature Switzerland AG 2018

Authors and Affiliations

  • Peter Brusov
    • 1
  • Tatiana Filatova
    • 1
  • Natali Orekhova
    • 2
  • Mukhadin Eskindarov
    • 1
  1. 1.Financial University under the Government of Russian FederationMoscowRussia
  2. 2.Center of Corporate Finance, Investment, Taxation and RatingsThe Research Consortium of Universities of the South of RussiaRostov-on-DonRussia

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