Merton Miller

Merton Miller received his PhD in economics from Johns Hopkins University and spent most of his career at the University of Chicago, where he taught from 1961 until his death in 2000. With Franco Modigliani he co-developed the Modigliani-Miller theorem, published in their landmark 1958 and 1963 papers. The first paper showed that capital structure is irrelevant to firm value in perfect capital markets; the second paper incorporated taxes and showed that the tax deductibility of interest payments creates a "tax shield" that provides a rationale for debt financing. Miller also developed the Miller equilibrium model of dividends, which showed that dividend policy too is irrelevant to firm value under certain conditions — extending the M&M logic to the question of payout policy. In addition to theoretical work, Miller was actively engaged in financial markets and financial innovation. He served as a director of the Chicago Board of Trade and was a strong advocate for the development of futures and options markets as mechanisms for risk transfer and price discovery. He received the Nobel Prize in Economic Sciences in 1990 jointly with Harry Markowitz and William Sharpe. Miller was known at Chicago as an extraordinarily clear and demanding teacher. He passed away in June 2000.