ABSTRACT
Franco Modigliani (pronounced mo-dil-lee-ani) is best known for two innovations in macroeconomics. To explain total consumer spending, he developed the life-cycle theory of savings and consumption. To explain business behavior, he helped formulate the famous Modigliani— Miller theorems. These theorems explain why corporate decisions about obtaining funds for investment, and decisions about repaying investors, should not affect the market value of a firm.
