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Modern Theory of Capital Cost and Capital Structure: Brusov–Filatova–Orekhova Theory (BFO Theory)

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

Abstract

One of the serious limitations of the Modigliani–Miller theory is the suggestion about perpetuity of the companies. In 2008, Brusov–Filatova–Orekhova (Filatova et al., Bull FU 48:68–77, 2008) have lifted up this limitation and have shown that the accounting of the finite lifetime (or finite age) of the company leads to significant changes of all Modigliani–Miller results (Мodigliani and Мiller, Am Econ Rev 48:261–297, 1958, Am Econ Rev 53:147–175, 1963, Am Econ Rev 56:333–391, 1966): capitalization of the company is changed, as well as the equity cost, ke, and the weighted average cost of capital, WACC, in the presence of corporative taxes. Besides, a number of qualitatively new effects in corporate finance, obtained in Brusov–Filatova–Orekhova theory (Brusov and Filatova, Finance Credit 435:2–8, 2011; Brusov et al., Appl Financ Econ 21:815–824, 2011a, Res J Econ Bus ICT 2:16–21, 2011b, Res J Econ Bus ICT (UK) 2:11–15, 2011c, Appl Financ Econ 22:1043–1052, 2012a, J Rev Global Econ 1:106–111, 2012b, J Rev Global Econ 2:94–116, 2013a, J Rev Global Econ 2:183–193, 2013b, Cogent Econ Finance 2:1–13, 2014a, J Rev Global Econ 3:175–185, 2014b; Filatova et al., Bull FU 48:68–77, 2008; Brusova, Financ Anal Prob Sol 34:36–42, 2011), are absent in Modigliani–Miller theory.

Keywords

Time moment Capital structure Corporate taxis Equity capital Miller theory 

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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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