Since the formulation of the M & M irrelevance propositions 40 years ago, financial economists have been debating whether there is such a thing as optimal capital structure-a proportion of debt to equity that maximizes current firm value. Some finance scholars have followed M & M by arguing that...

Thesis (Ph. D.)--University of Rochester. William E. Simon Graduate School of Business Administration, 2009.

If debt capacity is defined as the incremental debt that is optimally associated with an additional asset, then the debt capacity of growth options is negative. Underinvestment costs of debt increase and free cash flow benefits of debt fall with additional growth options. Thus, if firm value...

We develop a positive theory of the hedging behavior of value-maximizing corporations. We treat hedging by corporations simply as one part of the firm's financing decisions. We examine (1) taxes, (2) contracting costs, and (3) the impact of hedging policy on the firm's investment decisions as...

Incentives to manage accounting information are examined within 63 property-liability insurance company conversions from mutual ownership to common stock charter. In the conversion process, policyholders' embedded equity claims must be valued. Since mutuals have no separately traded equity,...

Since the formulation of the M&M propositions almost 50 years ago, financial economists have been debating whether there is such a thing as an optimal capital structure-a proportion of debt to equity that maximizes shareholder value. Some finance scholars have followed M&M in arguing that both...