Capital structure and competitive position in product market
This paper examines the effect of capital structure on the competitive position of firms in the product market, as measured by the market share. Theoretical predictions suggest that this effect depends on whether Cournot or Bertrand competition determines firms' interactions. We present evidence that leverage affects market share positively under both types of competitions. This evidence supports the prevailing version of the limited liability effect of debt financing. Alternatively, we demonstrate that a firm's competitive position is important in determining its choice of capital structure.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rajan, Raghuram G & Zingales, Luigi, 1995.
" What Do We Know about Capital Structure? Some Evidence from International Data,"
Journal of Finance,
American Finance Association, vol. 50(5), pages 1421-60, December.
- Raghuram G. Rajan & Luigi Zingales, 1994. "What Do We Know About Capital Structure? Some Evidence from International Data," NBER Working Papers 4875, National Bureau of Economic Research, Inc.
- Phillips, Gordon M., 1995. "Increased debt and industry product markets An empirical analysis," Journal of Financial Economics, Elsevier, vol. 37(2), pages 189-238, February.
- Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
- Showalter, Dean M, 1995. "Oligopoly and Financial Structure: Comment," American Economic Review, American Economic Association, vol. 85(3), pages 647-53, June.
- Cragg, John G. & Donald, Stephen G., 1993. "Testing Identifiability and Specification in Instrumental Variable Models," Econometric Theory, Cambridge University Press, vol. 9(02), pages 222-240, April.
- Kovenock, D. & Phillips, G.M., 1995.
"Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions,"
UFAE and IAE Working Papers
313.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Kovenock, Dan & Phillips, Gordon M, 1997. "Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions," Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 767-803.
- Dan Kovenock & Gordon M Phillips, 1995. "Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions," Working Papers 95-4, Center for Economic Studies, U.S. Census Bureau.
- Titman, Sheridan, 1984. "The effect of capital structure on a firm's liquidation decision," Journal of Financial Economics, Elsevier, vol. 13(1), pages 137-151, March.
- Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
- Sundaram, Anant K. & John, Teresa A. & John, Kose, 1996. "An empirical analysis of strategic competition and firm values The case of R&D competition," Journal of Financial Economics, Elsevier, vol. 40(3), pages 459-486, March.
- Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, 09.
- Laurent Fresard, 2010. "Financial Strength and Product Market Behavior: The Real Effects of Corporate Cash Holdings," Journal of Finance, American Finance Association, vol. 65(3), pages 1097-1122, 06.
- Evgeny Lyandres, 2006. "Capital Structure and Interaction among Firms in Output Markets: Theory and Evidence," The Journal of Business, University of Chicago Press, vol. 79(5), pages 2381-2422, September.
- Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
- Vojislav Maksimovic, 1988. "Capital Structure in Repeated Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 389-407, Autumn.
- Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
- Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
- Kuan, Tsung-Han & Li, Chu-Shiu & Liu, Chwen-Chi, 2012. "Corporate governance and cash holdings: A quantile regression approach," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 303-314.
- Hovakimian, Armen & Opler, Tim & Titman, Sheridan, 2001. "The Debt-Equity Choice," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(01), pages 1-24, March.
- Showalter, Dean, 1999. "Strategic debt: evidence in manufacturing," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 319-333, April.
- Maksimovic, Vojislav & Zechner, Josef, 1991. " Debt, Agency Costs, and Industry Equilibrium," Journal of Finance, American Finance Association, vol. 46(5), pages 1619-43, December.
When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:358-371. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.