I remember taking a Corporate Finance course in law school. I retained a few things therefrom, for example, a sense of the sharp legal distinction between the rights of debtors on the one hand and the rights of owners of equity on the other. There was some material too about friendly versus unfriendly takeovers, and the ways in which the latter might be resisted by the target company's board. But what I remember most vividly about the course was a discussion of the Miller-Modigliani theorem. This is the hypothesis proposed by the two named economists, Merton H. Miller and Franco Modigliani, that a rational corporate management will be indifferent as to whether it raises money by issuing debt or by issuing new stock. The debt/equity distinction, as important as it was in law, was trivial in economics. Or so the economists said. [ Investopedia contains a fine article explaining the basics.] I was very struck by this M/M theorem, and not just be...
