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Optimal capital structure, bargaining, and the supplier market structure

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  • Chu, Yongqiang

Abstract

This paper studies the relationship between firm leverage and supplier market structure. We find that firm leverage decreases with the degree of competition between suppliers. Specifically, leverage decreases with the elasticity of substitution between suppliers. Leverage also decreases with the number of suppliers when the elasticity of substitution is high, and increases with the number of suppliers when the elasticity is low. We also provide empirical evidence that is consistent with the model predictions.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 106 (2012)
Issue (Month): 2 ()
Pages: 411-426

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Handle: RePEc:eee:jfinec:v:106:y:2012:i:2:p:411-426

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Web page: http://www.elsevier.com/locate/inca/505576

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Keywords: Capital structure; Suppliers; Bargaining; Relation-specific investment;

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Cited by:
  1. João Teixeira, 2014. "Outsourcing with debt financing," Portuguese Economic Journal, Springer, vol. 13(1), pages 1-24, April.

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