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Financial Structure of Firms in Oligopoly Evidence from Korea

Author

Listed:
  • Kiwoong Cheong

    (Keimyung University)

  • Sanghack Lee

    (Kookmin University)

Abstract

This paper examines the effect of the product market structure on firms' financial structure. Following Brander and Lewis (1986), several recent papers show that a firm can use leverage to favorably improve its position in the product market. The present paper constructs the model that exhibits the linkage between the product market structure and financial structure of firms. The model is tested empirically using data taken from Korean firms. The empirical test finds that, contrary to theoretical predictions, debt levels of Korean firms are nega-tively correlated to market concentration. Combined with the test result of Cheong and Lee (1999), this result indicates that the Brander-Lewis hypothesis does not hold in Korea.

Suggested Citation

  • Kiwoong Cheong & Sanghack Lee, 1999. "Financial Structure of Firms in Oligopoly Evidence from Korea," Korean Economic Review, Korean Economic Association, vol. 15, pages 369-380.
    • Handle: RePEc:kea:keappr:ker-199912-15-2-10
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    More about this item

    Keywords

    Finamcial Structure; oligopoly; Korea; Brander-Lewis hypothesis;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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