DEFINITION of Franco Modigliani
Franco Modigliani was an Italian-American Keynesian economist. Modigliani was born in 1918 in Rome and won the Nobel Memorial Prize in Economics in 1985. One of Modigliani's contributions to economics was the life-cycle theory, which says that individuals primarily save money during their early years to pay for their later years, as opposed to saving money for the purpose of passing it on to their children. His other major contribution, in cooperation with Merton Miller, was the Modigliani-Miller theroem, which formed the foundation for capital structure analysis in corporate finance. Capital structure analysis helps companies to determine the most effective and beneficial ways to fund their companies through a mixture of equity and debt.
BREAKING DOWN Franco Modigliani
Modigliani served as president of the American Economic Association, the American Finance Association and the American Econometric Society. He also served as an advisor to Italian banks and politicians, the U.S. Treasury, the Federal Reserve System, and a number of European banks.