Extension of the Miller and Modigliani theory to allow for share repurchases
Abstract
Miller and Modigliani (1961) consider valuation of infinite horizon firms that may not engage in purchasing their own shares. While their fundamental valuation approach also applies to firms that purchase their own shares, their stream of dividends approach does not apply to these firms if they do not distribute “sufficient” cash via dividends and share repurchases, as characterized by a necessary and sufficient condition. Also presented is a modified stream of dividends approach that provides an equivalent valuation of every firm that can be valued by the fundamental approach.
- Published
- 29 June 2017
- Volume
- 2017 (2017)
- License
- CC BY 3.0
Copyright © 2017 Suresh P. Sethi. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Cite this article
S. P. Sethi, Extension of the Miller and Modigliani theory to allow for share repurchases, Math. Finance Lett. 2017 (2017), 3.
BibTeX
@article{Sethi2017,
author = {Sethi, Suresh P.},
title = {Extension of the Miller and Modigliani theory to allow for share repurchases},
journal = {Math. Finance Lett.},
volume = {2017},
year = {2017},
pages = {3},
doi = {}
}