Corporate financing and product market competition: evidence from firm-level data in Japan

Takanori Tanaka ()
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Takanori Tanaka: Institute of Social and Economic Research, Osaka University

Economics Bulletin, 2010, vol. 30, issue 2, 1373-1383

Abstract: This paper investigates the link between external financing and product market competition by focusing on different maturity structures. Using firm-level data for Japanese manufacturing firms over the period 1990-1995, we find that long-term loans enable firms to compete aggressively at a level below profit maximization. By contrast, short-term loans are not related to product market competition. Our results suggest that long-term loans play an important role in investment in market share for long-term profits through lowering prices.

Keywords: debt financing; price-cost margin (search for similar items in EconPapers)
JEL-codes: G3 L1 (search for similar items in EconPapers)
Date: 2010-05-16
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