A note on the effects of debt buybacks in the MM world

Mark Schaub

Applied Financial Economics Letters, 2008, vol. 4, issue 2, 77-79

Abstract: This study notes that in the world of Modigliani and Miller (MM), a debt buyback program will maximize the share price as well as cash flows to the stockholders. Also, holding period returns for investors that buy into the company before the debt buyback are higher than a similar MM firm that does not repurchase its debt.

Date: 2008
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DOI: 10.1080/17446540701579014

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