Miller has analyzed capital structure in the presence of both corporate and personal taxes. The present work investigates the effect of inflation on both interest rates and equity returns when the Miller equilibrium condition is employed in a loanable funds model. Both an interest rate effect and a redistribution effect are derived. The interest rate effect forces the responsiveness of the interest rate to the inflation rate to be below that hypothesized by Darby. However, the redistribution effect may change this responsiveness in either direction.

The recent world-wide increase in consumer prices has created an intense interest in inflation on the part of both the academic and the financial communities. For example, in his American Financial Association presidential address, Professor Lintner [4, p. 259] states “few matters are of more serious concern to students of finance and to members of the financial community than the impacts of inflation on our financial institutions and markets and its implication for investment policy.”

Journal Article The “Coase Theorem”: A Reexamination—Comment Get access Jeffrey F. Jaffe Jeffrey F. Jaffe University of Pennsylvania Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 89, Issue 4, November 1975, Pages 660–661, https://doi.org/10.2307/1884701 Published: 01 November 1975

Jeffrey Jaffe, Randolph Westerfield, Patterns in Japanese Common Stock Returns: Day of the Week and Turn of the Year Effects, The Journal of Financial and Quantitative Analysis, Vol. 20, No. 2 (Jun., 1985), pp. 261-272

ABSTRACT Academic finance has explored the effect of taxes on corporate capital structure in great detail. By contrast, the effect of taxes on the capital structure of partnerships, REIT's, and related entities has received little attention. The present paper shows that, under general conditions, the values of partnerships and REIT's are invariant to leverage, contradicting the sparse literature in the area. A proof similar to that of Modigliani‐Miller is employed. The effect of real world imperfections is also examined.

Academic finance has explored the effect of taxes on corporate capital structure in great detail. By contrast, the effect of taxes on the capital structure of partnerships, real estate investment trusts, and related entities has received little attention. The present paper shows that, under general conditions, the values of partnerships and real estate investment trusts are invariant to leverage, contradicting the sparse literature in the area. A proof similar to that of Modigliani-Miller is employed. The effect of real world imperfections is also examined.