TY - JOUR
AU1 - Kim, E. Han
AB -  HAN KIM* INTRODUCTION AN ISSUE OF CONCERN to the theory of business finance over the past two decades has been the effect of financial structure on the valuation of firms. The traditional presumption is that a firm's value is a concave function of its financial leverage, and that an optimal financial leverage exists where the slope of the function is zero.' This argument is suspect to the extent that it attempts to value a firm's securities in isolation from the rest of the capital market. The pathbreaking works by Modigliani and Miller (MM) have provided the foundations for studying the effect of financial structure on the valuation of firms in equilibrium. MM (1958, 1969) establish that the total value of the firm, in the absence of taxes, remains constant across all degrees of financial leverage. Building on the foundations laid by MM, numerous authors/ have confirmed the MM no-tax thesis using a variety of equilibrium approaches. MM (1963) and some of these authors have shown further that a proportional corporate income tax provides sufficient economic incentive for firms to maximize their use of debt financing. However, in the five-year period from 1966 to 1970 the capital needs of 
TI - A MEAN‐VARIANCE THEORY OF OPTIMAL CAPITAL STRUCTURE AND CORPORATE DEBT CAPACITY
JF - The Journal of Finance
DO - 10.1111/j.1540-6261.1978.tb03388.x
DA - 1978-03-01
UR - https://www.deepdyve.com/lp/wiley/a-mean-variance-theory-of-optimal-capital-structure-and-corporate-debt-srpmuct45K
SP - 45
VL - 33
IS - 1
DP - DeepDyve
ER -