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In this paper, we directly test the Modigliani-Miller theorem in the lab. Applying a general equilibrium approach and not allowing for arbitrage among firms with different capital structures, we are able to address this issue without making any assumptions about individuals’ risk attitudes and...
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In this paper, we experimentally test the Modigliani-Miller theorem. Applying a general equilibrium approach and not allowing for arbitrage among firms with different capital structure, we are able to address a question fundamental to the valuation of firms: does capital structure affect the...
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competition. We find that leverage has strategic effects, but those effects are much weaker than predicted by theory. Specifically … predicted by theory. It appears that subjects recognize the strategic effects of their own debt. However, they do not (want to …
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