Titman (2001)
MM I
Definition – Financing and risk management choices will not affect firm value if the following conditions hold: (1) Total cash flow to a firm’s financial claimants are unaffected by these choices; (2) Efficient markets
Frictionless and complete markets are clearly sufficient for capital structure irrelevant.
MM II
Corporation need not be concerned about the market conditions and needs of investors when designing their financial structures
Definition – the cost of capital of levered equity is equal to the cost of capital of unlevered equity plus a premium that is proportional to the market value of debt-equity ratio
The process of tailoring or repacking securities is costless and competitive
MM III
With perfect capital markets, financial transactions neither add nor destroy value, but instead represent a repacking of risk

The academic commodity has concluded that thinking about the market condition is unlikely to help understand observed capital structures.
Market imperfections are second order effect and that financial intermediaries can more efficiently address security design issues.
The implicit assumption is that if investors do demand specially tailored securities, financial intermediaries are better positioned to capture the rents associated with creating them
Practitioners tend to talk about whether “market conditions” favor debt vs. equity financing
High Yield Debt Market
The explanation of the phenomenon because of a coordination failure that can be understood if we view the market as consisting of segmented investor clienteles.
High yield debt markets require analysts that have specific skills for evaluating credit risk
However, absence of good analysts – and markets are subjected to the asymmetry information, so it is likely to attract investors and analysts with the requisite skills – corporations are less likely to