Capital Structure and Product Market Strategy

Chong-En Bai and Shan Li

No 279, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper develops a general framework to analyze the relationship between a firm's capital structure and its product market strategy and presents a taxonomy of whether debt makes a firm tough or soft in product market competition and how strategic considerations affect the leverage of a firm based on the nature of the firm's agency problem and the characteristics of the product market. We then review the related literature and point out unexplored linkages between capital structure and product market strategies. Finally, we discuss the empirical implications of our theoretical results.

Date: 1994-07
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Journal Article: Capital Structure and Product Market Strategy (2000)
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