Test of Linearity in Ke and Kd as Claimed in M&M Theorem: Evidence from KSE-Pakistan

Hanif, Muhammad

doi:10.2139/ssrn.1549465

Download This Paper

Open PDF in Browser

Add Paper to My Library

Test of Linearity in Ke and Kd as Claimed in M&M Theorem: Evidence from KSE-Pakistan

9 Pages Posted: 8 Feb 2010 Last revised: 21 Dec 2010

See all articles by Muhammad Hanif

Muhammad Hanif

National University of Computer and Emerging Sciences (NUCES or FAST-NU) - FAST School of Business

Date Written: February 7, 2010

Abstract

This study is conducted to test the linearity between cost of debt and leverage as claimed in 2nd proposition of Modigliani and Miller theorem. Sample size is KSE-30 Pakistan after excluding financial firms. Findings suggest that linearity does not exist between Ke and Kd hence raises questions about the validity of M&M Model.

Keywords: MM Model, KSE, Pakistan

JEL Classification: G32

Suggested Citation: Suggested Citation

Hanif, Muhammad, Test of Linearity in Ke and Kd as Claimed in M&M Theorem: Evidence from KSE-Pakistan (February 7, 2010). Available at SSRN: https://ssrn.com/abstract=1549465 or http://dx.doi.org/10.2139/ssrn.1549465