Beyond Peers: Cross-Industry Competition and Strategic Financing

Boris Nikolov, Norman Schuerhoff and Zepeng Wang
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Boris Nikolov: University of Lausanne; Swiss Finance Institute; European Corporate Governance Institute (ECGI)
Zepeng Wang: University of Lausanne and Swiss Finance Institute

No 24-45, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Corporate financial leverage within competition networks is determined by both direct and indirect competitors. Using data on firms’ self reported competitors, we identify eleven stable competition communities within the U.S. economy, where firms are grouped into communities based on competitive interactions both within and across industries. We find a strong complementarity between a firm’s leverage and that of its community members, consistent with strategic interactions with both immediate peers and chain effects from the propagation of shocks affecting indirect peers. To achieve identification, we employ a granular instrumental variable approach. Our results highlight that firms’ financial strategies are shaped not only by direct competition but also by the broader competitive environment.

Keywords: capital structure; strategic competition; financial complementarity; competitor networks (search for similar items in EconPapers)
JEL-codes: G31 G32 L13 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2024-09
New Economics Papers: this item is included in nep-cfn, nep-com and nep-net
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2445

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