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Capital Structure Under Collusion

Listed author(s):
  • Ferrés, Daniel
  • Ormazabal, Gaizka
  • Povel, Paul
  • Sertsios, Giorgio

We study the financial leverage of firms that collude by forming a cartel. We find that cartel firms have lower leverage ratios during collusion periods, consistent with the idea that reductions in leverage help increase cartel stability. Cartel firms have a surprisingly large economic footprint (they represent more than 20% of the total market capitalization in the U.S.), so understanding their decisions is relevant. Our findings show that anti-competitive behavior has a significant effect on capital structure choices. They also shed new light on the relation between profitability and financial leverage.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 12151.

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Date of creation: Jul 2017
Handle: RePEc:cpr:ceprdp:12151
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