Abstract
The field of corporate finance, over the years, has come a long way from an institutional in character to an economic orientation.
If all the economists were laid end to end, they would never reach a conclusion.
George Bernard Shaw
Raj S. Dhankar, Cost of Capital, Capital Structure , Dividend Policy and Value of Firm : Three Decades Later, Decision, Vol. 19, No. 1, January–March 1992.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
In arbitrage the time purchased can be delivered against the sale contract, so then any violation of the law of one price generates a sure profit. No such delivery is possible under the MM theorem, so that it is no more than another theorem on how investors value different securities.
- 2.
Stiglitz and Rubinstien showed that the MM leverage theory holds with risky debt. However, the theory requires that both bankruptcy and the enforcement of me-first rules are costless.
References
Arditti F., Levy, H., & Sarna, M. (1977). Taxes, capital structure and the cost of capital: Some extensions. Quarterly Review of Economic and Business, Summer.
Black, F. (1976). The dividend puzzle. Journal of Portfolio Management, Winter.
Bradley, M., Jarrell, G. A., & Kain, E. H. (1984, July). On the existence of an optimal capital structure: Theory and evidence. Journal of Finance.
Brennen, M. J., & Schwartz, E. S. (1978, January). Corporate income taxes, valuation, and the problem of optimal capital structure. Journal of Business, Vol. 51.
Brigham E. F., & Gordon, M. J. (1968, March). Leverage, dividend policy, and the cost of capital. The Journal of Finance.
Corporate income taxes and the cost of capital: A Correction. American Economic Review, June, 1963.
DeAngelo, H., & Masulis, R. W. (1980, March). Optimal capital structure under corporate and personal taxation. Journal of Financial Economics.
Durand, D. (1952). Cost of equity and debt funds for business: Trends and problems of measurement. In Conference on Research in Business Finance. New York: National Bureau of Economic Research.
Durand, D. (1959, September). The cost of capital, corporation finance, and the theory of investment: Coment. American Economic Review.
Fama E. F., (1974, June). The empirical relationships between the dividend and investment decision of firms. American Economic Review.
Fama, E. F. (1978, June). The effects of a firm’s investment and financing decisions on the welfare of its security holders. American Economic Review.
Farrar, D. E., & Selwyn, Taxes, L. L. (1967, December). Corporate financial policy, and returns to investors. National Tax Journal.
Fazzari S. M., R. G. Hubbard., & Petersen, B. C. (1989, April). Financing constraints and corporate investment. Brookings Papers on Economic Activity.
FewingsD, R. (1979). Corporate growth and common stock risk. Greenwich: C T, Jai Press.
Gordon, M. J. (1963, May). Optional investment and financing policy. Journal of Finance.
Hochman S. J. (1980). The beta coefficient—An instrumental variable approach. Ph. D. Dissertation University of Toronto, 1980.
Jensen, M. C., & Meckling, W. H. (1976, October). Theory of the firm: Managerial behaviour, agency costs, and ownership structure. Journal of Financial Economics.
Lintner, J. (1962, August). Dividends, earnings, leverage, stock prices, and the supply of capital to corporations. Review of Economics and Statistics.
Litzenberger, R. H., & Ramaswamy, K. (1979, June). The effects of personal taxes and dividends on capital asset prices: Theory and empirical evidence. Journal of Financial Economics.
Markowitz, H., (1952). Portfolio selection. Journal of Finance, March 1952.
Markowitz, H., (1959). Portfolio selection, New Haven, CT: Yale University Press.
Masulis R. W., (1980, June)The effects of capital structure change on security prices: A study of exchange offers. Journal of Financial Economics.
Miller, M. (1977, May). Debt and taxes. Journal of Finance.
Miller, M., & Modigiliani, F. (1966, June). Some estimates of the cost of capital to the electric utility industry 1954–1957. American Economic 33. Review.
Miller, M., Modigliani, F. (1961, October). Dividend policy, growth, and the valuation of shares. Journal of Business.
Modigliani, F., & Miller, M. (1958, June)The cost of capital, corporation finance and the theory of investment. American Economic Review.
Modigliani, F., & Miller, M. (1959, September). The cost of capital, corporation finance, and the theory of investment: Reply. American Economic Review.
Modigliani, F., & Miller, M. (1961, October). Dividend policy, growth and the valuation of shares. Journal of Business.
Myers S. C. (1984, July). The capital structure puzzle. Journal of Finance.
Ross S. A., (1973, May). The economic theory of agency: The principals problems. American Economic Review. , 1973.
Soloman, E. (1963, May). Leverage and the cost of capital. Journal of Finance.
Tobin J., (1958, February). Liquidity preference as behaviour towards risk’. Review of Economic Studies.
Wippern, R. F., (1966, December). Financial structure and the value of the firm. The Journal of Finance.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2019 Springer Nature India Private Limited
About this chapter
Cite this chapter
Dhankar, R.S. (2019). Cost of Capital, Capital Structure, Dividend Policy and Value of Firm. In: Capital Markets and Investment Decision Making. Springer, New Delhi. https://doi.org/10.1007/978-81-322-3748-8_11
Download citation
DOI: https://doi.org/10.1007/978-81-322-3748-8_11
Published:
Publisher Name: Springer, New Delhi
Print ISBN: 978-81-322-3746-4
Online ISBN: 978-81-322-3748-8
eBook Packages: Economics and FinanceEconomics and Finance (R0)