Optimal Capital Structures for Regulated Public Utilities Available to Purchase

Between the milestones represented by Modigliani and Miller's (1958, 1963) seminal papers and Miller's (1977) and Myers' (1984) Presidential Addresses to the American Finance Association, there has been a vast outpouring of theoretical and empirical articles dealing with the question of whether or not a “best” capital structure exists and, if it does, how it is determined. In most theoretical models, the “best” capital structure is defined to be that which maximizes the total market value of a firm's securities although Donaldson (1969), Patterson (1984) and others have provided survey data which indicate that this frame of reference and its attendant logic may not be the most relevant one for financial managers.