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Capital structure under collusion

Daniel Ferrés, Gaizka Ormazabal, Paul Povel and Giorgo Sertsios

Journal of Financial Intermediation, 2021, vol. 45, issue C

Abstract: We analyze the financial leverage of firms that collude to soften product market competition by forming a cartel. We find that cartel firms have lower leverage during collusion periods. This is consistent with the idea that cartel firms strategically reduce leverage to make their cartels more stable, because high leverage makes deviations from a cartel agreement more attractive. Given that cartels have a large economic footprint, their study is also relevant for the capital structure literature, which has largely ignored the role of anti-competitive behavior.

Keywords: Capital structure; Financial leverage; Collusion; Cartels (search for similar items in EconPapers)
JEL-codes: G32 L12 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Capital Structure Under Collusion (2017) Downloads
Working Paper: Capital Structure Under Collusion (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:45:y:2021:i:c:s1042957320300085

DOI: 10.1016/j.jfi.2020.100854

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