IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v76y1986i5p956-70.html
   My bibliography  Save this article

Oligopoly and Financial Structure: The Limited Liability Effect

Author

Listed:
  • Brander, James A.
  • Lewis, Tracy R.

Abstract

The authors argue that product market decisions and financial structure will normally be related. Assuming an oligopoly structure in which financial decisions and output decisions follow insequence, it is shown that limited liability may commit a leveraged firm to a more aggressive output stance, expanding its market share and profit at the expense of a fully equity-financed rival. Firms will therefore have incentives to use financial structure to influence the product market, leading normally, to an internal solution for the debt equity ratio even in the absence of bankruptcy costs and tax advantages of debt.

Suggested Citation

  • Brander, James A. & Lewis, Tracy R., 1986. "Oligopoly and Financial Structure: The Limited Liability Effect," American Economic Review, American Economic Association, vol. 76(5), pages 956-970, December.
  • Handle: RePEc:aea:aecrev:v:76:y:1986:i:5:p:956-70
    as

    Download full text from publisher

    File URL: http://www.jstor.org/stable/pdf/1816462.pdf
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:76:y:1986:i:5:p:956-70. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.