Affordable Access

Download Read

The reduced form as an empirical tool: a cautionary tale from the financial veil

Authors

Abstract

An analysis of the limitations of the reduced-form empirical strategy as a method of testing the Modigliani-Miller model of corporate financial structure, demonstrating that an empirical strategy that is not closely tied to an underlying economic theory of behavior will usually yield estimates that are too imprecise or too unreliable to form a basis for policy.

There are no comments yet on this publication. Be the first to share your thoughts.