摘要：The results of Modigliani-Miller (1958) are still frequently referenced today. In broad out-line, MM theory indicates that for a firm owned by diversified investors, any risk that can be diversi-fied against broader holdings is irrelevant to the owners – and thus it is not worthwhile for the firm to incur mitigation costs for such risks. However, this result is based on numerous simplifying as-sumptions, including the assumption that distressed firms have access to unlimited new capital with no extra costs or conditions. Clearly, this is not the case. Froot et al. (1993) is a widely cited refer-ence for the difference in cost of raising new capital vs. retaining earnings, and its conclusion is that firms with ongoing capital needs should protect their earnings stream through risk transfer. Subse-quent empirical studies have supported their ideas. Overall, the assumptions behind the MM framework simply do not hold, so this framework is not appropriate for the practice of Enterprise Risk Management. However, due to information lags many insurance CFOs have been brought up within this background, so actuaries need to understand it and be able to discuss it coherently.
