Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions

Dan Kovenock and Gordon Phillips

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: This paper examines whether capital structure decisions interact with product market characteristics to influence plant closing and investment decisions. The empirical evidence in this paper shows that a firm's capital structure, plant level efficiency, and industry capacity utilization are significant determinants of plant (dis)investment decisions. We find that the effects of high leverage on investment and plant closing are significant when the industry is highly concentrated. Following their recapitalizations, firms in industries with high concentration are more likely to close plants and less likely to invest. In addition, we find that rival firms are less likely to close plants and more likely to invest when the market share of leveraged firms is higher.

Keywords: CES; economic; research; micro; data; microdata; chief; economist (search for similar items in EconPapers)
Date: 1995-03
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Citations: View citations in EconPapers (20)

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Related works:
Journal Article: Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions (1997)
Working Paper: Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions (1995)
Working Paper: Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:95-4

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