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Capital Structure Under Collusion

Ferr�s, Daniel, Gaizka Ormazabal, Paul Povel () and Giorgio Sertsios

No 12151, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the financial leverage of firms that collude by forming a cartel. We find that cartel firms have lower leverage ratios during collusion periods, consistent with the idea that reductions in leverage help increase cartel stability. Cartel firms have a surprisingly large economic footprint (they represent more than 20% of the total market capitalization in the U.S.), so understanding their decisions is relevant. Our findings show that anti-competitive behavior has a significant effect on capital structure choices. They also shed new light on the relation between profitability and financial leverage.

Keywords: Capital Structure; cartels; Collusion; Financial Leverage; Financial Policies; Trigger Strategies (search for similar items in EconPapers)
JEL-codes: G32 L12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-com, nep-ind and nep-law
Date: 2017-07
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