Capital Structure and Interaction among Firms in Output Markets: Theory and Evidence

Evgeny Lyandres
Additional contact information
Evgeny Lyandres: Rice University

The Journal of Business, 2006, vol. 79, issue 5, 2381-2422

Abstract: I develop a simple model that examines the relations between the extent of competitive interaction among firms in output markets, their capital structures, and the aggressiveness of their operating strategies. A firm's optimal leverage is related to the degree to which its operating strategy affects its rivals' value functions and resulting optimal output market choices. This relation is positive, regardless of whether the competition in output markets is in strategic substitutes or in strategic complements. I test the model's prediction using two proxies for the extent of competitive interaction among firms. The empirical evidence provides support for the model.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
http://dx.doi.org/10.1086/505239 main text (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:79:y:2006:i:5:p:2381-2422

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().