Optimal capital structure, bargaining, and the supplier market structure

Yongqiang Chu

Journal of Financial Economics, 2012, vol. 106, issue 2, 411-426

Abstract: This paper studies the relationship between firm leverage and supplier market structure. We find that firm leverage decreases with the degree of competition between suppliers. Specifically, leverage decreases with the elasticity of substitution between suppliers. Leverage also decreases with the number of suppliers when the elasticity of substitution is high, and increases with the number of suppliers when the elasticity is low. We also provide empirical evidence that is consistent with the model predictions.

Keywords: Capital structure; Suppliers; Bargaining; Relation-specific investment (search for similar items in EconPapers)
JEL-codes: C71 G32 L22 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:106:y:2012:i:2:p:411-426

DOI: 10.1016/j.jfineco.2012.05.010

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