The Leverage of Growth Firms

Authors

  • Sheen Liu Washington State University – Pullman

DOI:

https://doi.org/10.33423/jabe.v21i9.2683

Keywords:

Business, Economics, Growth Firms, Leverage, Modigliani and Miller (M&M) theory

Abstract

Theories on the capital structure of growth firms produce inconsistent and puzzling results. We revisit the Modigliani and Miller (M&M) theory on capital structure and value of tax shields. Using the M&M’s arbitrage pricing arguments, we are able to extend the theory to growth firms and reconcile the theories of capital structure for growth firms with the M&M theory for no-growth firms. We unify the theories and resolve the puzzles raised in the literature.

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Published

2019-12-30

How to Cite

Liu, S. (2019). The Leverage of Growth Firms. Journal of Applied Business and Economics, 21(9). https://doi.org/10.33423/jabe.v21i9.2683

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Articles