Testing the Modigliani-Miller theorem directly in the lab

Contains fulltext : 111867.pdf (publisher's version ) (Open Access)We present an experiment designed to test the Modigliani-Miller theorem. Applying a general equilibrium approach and not allowing for arbitrage among firms with different capital structures, we find that, in accordance with the theorem, participants well recognize changes in the systematic risk of equity associated with increasing leverage and, accordingly, demand higher rate of return. Yet, this adjustment is not perfect: subjects underestimate the systematic risk of low-leveraged equity whereas they overestimate the systematic risk of high-leveraged equity, resulting in a U-shaped cost of capital. A (control) individual decision-making experiment, eliciting several points on individual demand and supply curves for shares, provides some support for the theorem.24 p

Inventing and patenting activities of scientists: in the expectation of money or reputation?

Academic commercialization, Patents, Rewards, Reputation, Signaling, B31, O31, O34,

Entrepreneurship in India : the question of occupational transition

Occupational transition from salaried to self-employment status is important in developed economies, but is even more critical in emerging economies, as individuals’ occupational choices can drive economic development. Using data on 3,295 individuals from 23 administrative regions in India, we examine the effect of regional and geographic factors on actual and intended transition. We find that regional self-employment and unemployment rates are associated with a lower likelihood of past and future transitions, but that regional gross domestic product (GDP) per capita is only relevant for actual transitions. Further, urban/rural location moderates the effects of income ratios and regional GDP per capita. While we observe similarities between India and developed economies, there are intriguing differences, and new insights are identified