# Modigliani-Miller Theorem

*Corporate Finance & M&A — Finicade finance glossary*

Modigliani and Miller proved that without taxes, bankruptcy costs or information gaps, capital structure does not affect firm value.

Modigliani and Miller proved that in a world without taxes, bankruptcy costs or information gaps, capital structure doesn't affect firm value — the pie is the same however you slice it. The result matters not because those conditions hold but because they don't: it tells you that any real benefit of leverage must come specifically from taxes, distress costs, or signalling, and forces the argument onto those grounds.

**Also known as:** MM theorem, capital structure irrelevance

**Related terms:** [Capital Structure](https://finicade.com/glossary/capital-structure), [WACC](https://finicade.com/glossary/wacc), [Cost of Debt](https://finicade.com/glossary/cost-of-debt), [Pecking Order Theory](https://finicade.com/glossary/pecking-order-theory), [No-Arbitrage](https://finicade.com/glossary/no-arbitrage)

Source: https://finicade.com/glossary/modigliani-miller-theorem