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Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions

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Author Info
Kovenock, Dan
Phillips, Gordon M

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Abstract

We examine whether sharp debt increases through leveraged buyouts and recapitalizations interact with market structure to influence plant closing and investment decisions of recapitalizing firms and their rivals. We take into account the fact that recapitalizations and investment decisions are both endogenous and may be simultaneously influenced by the same exogenous events. Following their recapitalizations, firms in industries with high concentration are more likely to close plants and less likely to invest. Rival firms are less likely to close plants and more likely to invest when the market share of leveraged firms is higher. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

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Publisher Info
Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 10 (1997)
Issue (Month): 3 ()
Pages: 767-803
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Handle: RePEc:oup:rfinst:v:10:y:1997:i:3:p:767-803

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  1. Richard Harris & Catherine Robinson, 2005. "Impact of Regional Selective Assistance on sources of productivity growth: plant-level evidence from UK manufacturing, 1990--98," Regional Studies, Taylor and Francis Journals, vol. 39(6), pages 751-765, August. [Downloadable!] (restricted)
  2. Winter, Joachim, 1998. "Does Firms` Financial Status Affect Plant-Level Investment and Exit Decision," Sonderforschungsbereich 504 Publications 98-48, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
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  3. Gordon M Phillips & Vojislav Maksimovic, 1996. "Efficiency of Bankrupt Firms and Industry Conditions: Theory and Evidence," Working Papers 96-12, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  4. Stefan Arping, 2000. "Debt and Product Market Fragility," Econometric Society World Congress 2000 Contributed Papers 1227, Econometric Society. [Downloadable!]
  5. Severin Borenstein & Nancy L. Rose, 1995. "Do Airlines in Chapter 11 Harm Their Rivals? Bankruptcy and Pricing Behavior in U.S. Airline Markets," NBER Working Papers 5047, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Gianni deFraja & Claudio Piga, 2000. "Strategic Debt in Vertical Relationships," Econometric Society World Congress 2000 Contributed Papers 0059, Econometric Society. [Downloadable!]
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  8. von Furstenberg, George M. & von Kalckreuth, Ulf, 2006. "Dependence on external finance: an inherent industry characteristic?," Discussion Paper Series 1: Economic Studies 2006,30, Deutsche Bundesbank, Research Centre. [Downloadable!]
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  9. Michael Ollinger & Jorge Fernandez-Cornejo, 1995. "Innovation and Regulation in the Pesticide Industry," Working Papers 95-14, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  10. Antoine Faure-Grimaud & Roman Inderst, 2005. "Conglomerate Entrenchment under Optimal Financial Contracting," American Economic Review, American Economic Association, vol. 95(3), pages 850-861, June. [Downloadable!] (restricted)
  11. Nicola Cetorelli, 2004. "Real effects of bank competition," Working Paper Series WP-04-03, Federal Reserve Bank of Chicago. [Downloadable!]
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  12. Luigi Zingales, 1997. "Survival of the Fittest or the Fattest? Exit and Financing in the Trucking Industry," NBER Working Papers 6273, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Januszewski, Silke I. & Köke, F. Jens & Winter, Joachim K., 1999. "Product market competition, corporate governance and firm performance : an empirical analysis for Germany," ZEW Discussion Papers 99-63, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  14. Douglas W Dwyer, 1995. "Whittling Away At Productivity Dispersion," Working Papers 95-5, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  15. Bergman, Mats A. & Johansson, Per, 2000. "Strategic Investments in the Pulp and Paper Industry: A Count Data Regression Analysis," Working Paper Series 536, Research Institute of Industrial Economics. [Downloadable!]
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  16. Coucke, Kristien & Pennings, Enrico & Sleuwaegen, Leo, 2005. "Employee lay-off under different modes of restructuring," Vlerick Leuven Gent Management School Working Paper Series 2005-13, Vlerick Leuven Gent Management School. [Downloadable!]
  17. Matthew J. Clayton, 1996. "Debt, Investment, and Product Market Competition," New York University, Leonard N. Stern School Finance Department Working Paper Seires 96-21, New York University, Leonard N. Stern School of Business-. [Downloadable!]
  18. Matthew J. Clayton, 1999. "Debt, Investment, and Product Market Competition," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-056, New York University, Leonard N. Stern School of Business-. [Downloadable!]
  19. Eslyn L. Jean-Baptiste & Michael H. Riordan, 2003. "Capital markets constrain industry scale," Discussion Papers 0304-05, Columbia University, Department of Economics. [Downloadable!]
  20. Leach, J. Chris & Moyen, Nathalie & Yang, Jing, 2004. "On the Strategic Use of Debt and Capacity in Imperfectly Competitive Product Markets," SIFR Research Report Series 33, Swedish Institute for Financial Research. [Downloadable!]
  21. Ernesto Schargrodsky, 2002. "The Effect of Product Market Competition on Capital Structure: Empirical Evidence from the Newspaper Industry," Business School Working Papers veintiocho, Universidad Torcuato Di Tella. [Downloadable!]
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  23. Dimara, Efthalia & Tzelepis, Dimitris & Skuras, Dimitris, 2000. "Regional Development Incentives And Firm Survival: A Case Study Of The Greek Food Sector," ERSA conference papers ersa00p209, European Regional Science Association. [Downloadable!]
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