Threat of entry and debt maturity: Evidence from airlines
Journal of Financial Economics, 2018, vol. 127, issue 2, 226-247
I explore the effect of the threat posed by low-cost competitors on debt structure in the airline industry. I use the route network expansion of low-cost airlines to identify routes where the probability of future entry increases dramatically. I find that when a large portion of their market is threatened, incumbents significantly increase debt maturity before entry occurs. Overall, the main findings suggest that airlines respond to entry threats trading off the benefits of short-term financing for lower rollover risk. The results are consistent with models in which firms set their optimal debt structure in the presence of costly rollover failure.
Keywords: Competition; Debt maturity; Rollover risk; Threat of entry (search for similar items in EconPapers)
JEL-codes: G31 G32 D22 D43 L93 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:127:y:2018:i:2:p:226-247
Access Statistics for this article
Journal of Financial Economics is currently edited by G. William Schwert
More articles in Journal of Financial Economics from Elsevier
Series data maintained by Dana Niculescu ().