Property Rights and Corporate Finance

Richard A. Graff and Joseph P. Kairys ()
Additional contact information
Richard A. Graff: Electrum Partners L.L.C., Postal: Chicago, IL
Joseph P. Kairys : Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG

No 174, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: We examine a central result in corporate finance – the Modigliani-Miller capital structure irrelevance proposition – from a Coasian property rights perspective. Building upon the work of Coase, Demsetz and Cheung, we develop an enabling methodology to study the impact of positive Coasian transaction costs. When the Modigliani-Miller assumption of default-free debt is relaxed in the analysis of corporate leverage, either long-lived transaction costs related to property rights must be explicitly assumed away, or long-lived transaction costs related to property rights must be incorporated into the analysis.

Keywords: property rights; transaction costs; capital structure (search for similar items in EconPapers)
JEL-codes: D23 G32 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2005-08-23
New Economics Papers: this item is included in nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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