Capital structure and competitive position in product market
نویسنده
چکیده
Article history: Received 27 January 2012 Received in revised form 25 June 2013 Accepted 25 June 2013 Available online 8 July 2013 This paper examines the effect of capital structure on the competitive position of firms in the product market, as measured by themarket share. Theoretical predictions suggest that this effect depends onwhether Cournot or Bertrand competition determines firms' interactions.We present evidence that leverage affects market share positively under both types of competitions. This evidence supports the prevailing version of the limited liability effect of debt financing. Alternatively, we demonstrate that a firm's competitive position is important in determining its choice of capital structure. © 2013 Elsevier Inc. All rights reserved. JEL classification: G32 L10 L60
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