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Author: Sabri Boubaker Publisher: ISBN: Category : Languages : en Pages : 50
Book Description
Motivated by prior research on the informational and monitoring role of product market competition, we examine how competitive pressure affects firms' choice between bank debt and public debt. Using a sample of 3,675 U.S. firms over the period 2001-2013, we find that competitive pressure from the product market leads firms to rely less on bank debt financing. In a natural experiment setting, we also find that there is a significant decrease in firm reliance on bank debt after large import tariff reductions. In additional analyses, we show that the effect of competitive pressure on debt choice is more pronounced for firms with greater exposure to competition, higher financial constraints, and weaker governance practices. Moreover, we find that product market competition is associated with long-term maturity debt. Taken together, our study generates the important insight that external governance pressure from the product market acts as an alternate governance mechanism for bank debt monitoring.
Author: Sabri Boubaker Publisher: ISBN: Category : Languages : en Pages : 50
Book Description
Motivated by prior research on the informational and monitoring role of product market competition, we examine how competitive pressure affects firms' choice between bank debt and public debt. Using a sample of 3,675 U.S. firms over the period 2001-2013, we find that competitive pressure from the product market leads firms to rely less on bank debt financing. In a natural experiment setting, we also find that there is a significant decrease in firm reliance on bank debt after large import tariff reductions. In additional analyses, we show that the effect of competitive pressure on debt choice is more pronounced for firms with greater exposure to competition, higher financial constraints, and weaker governance practices. Moreover, we find that product market competition is associated with long-term maturity debt. Taken together, our study generates the important insight that external governance pressure from the product market acts as an alternate governance mechanism for bank debt monitoring.
Author: Gordon M. Phillips Publisher: DIANE Publishing ISBN: 9781568069142 Category : Business & Economics Languages : en Pages : 62
Book Description
Tests whether capital structure influences product market competition between firms that have sharply increased the debt in their capital structure.
Author: Matthew J. Clayton Publisher: ISBN: Category : Languages : en Pages : 42
Book Description
Recent empirical literature on the interaction between capital structure, investment, and product market decisions suggests that debt leads to lower investment expenditures and weaker product market competition. Theoretical literature in this area has been unable to fully explain this finding (perhaps because all theoretical papers look only at two of the above decisions). This paper develops a model which examines all three decisions and shows that debt and investment can be substitutes in a model where firms rationally take on debt. Furthermore, it is demonstrated that when firms compete with prices in the product market, an increase in debt leads to lower investment and higher prices.
Author: Vittoria Cerasi Publisher: ISBN: Category : Languages : en Pages : 31
Book Description
This paper presents a model where bank credit depends upon borrowersņ' product market structure. We show that a larger number of competitors in the industry may increase credit availability by enhancing the resale value of the collateralized productive assets. We also study how this benefiijt of competition is affected by the existence of outsiders willing to bid for the collateralized productive assets of the insiders. Our model encompasses the standard case of Cournot competition either when the default probability goes to zero or when there are multiple outsiders bidding for the productive assets. We test the empirical implications of the theoretical analysis exploiting information on the access to ጿinance of small and medium Italian fiijrms and fiijnd supportive evidence.
Author: Jean-Etienne de Bettignies Publisher: ISBN: Category : Languages : en Pages : 70
Book Description
This paper examines the interaction between venture risk, product market competition and entrepreneurs' choice between bank financing and venture capital (VC) financing. Under bank financing, a debt-type contract emerges as optimal, which allows the entrepreneur to retain full control of the venture and thus yields strong effort incentives, as long as she can service the debt repayment; but leads to liquidation in case of default, making the venture's success quite sensitive to exogenous, even temporary shocks that may hinder debt repayment. Under VC financing an equity-type contract emerges as optimal, which is not sensitive to exogenous shocks, but requires the entrepreneur to share a fraction of the rents with the financier, thus yielding lower effort incentives for the entrepreneur. There exists a threshold level of venture risk such that bank financing is optimal if and only if venture risk is below that threshold. Product market competition increases the value of stronger entrepreneurial incentives, and thus increases the maximum level of risk the entrepreneur is willing to take before switching from bank financing to VC financing. This is a robust result that is shown to hold in various models of competition, including Hotelling, Salop, Dixit-Stiglitz, Cournot-to-Bertrand switch.
Author: Sasanee Lovisuth Publisher: ISBN: Category : Languages : en Pages :
Book Description
Financial and industrial economists are increasingly recognising the interaction between capital structure and firms' strategies in the product market. A debate exists regarding the nature of the relationship between firms' product market power and financial leverage. Particularly, researchers have asked whether the relationship is positive, negative or non-linear. This thesis contributes to this research agenda by developing game-theoretic models, and conducting empirical tests. Specifically, the thesis examines the effects of market power on a firm's use of long-term debt.
Author: Jennifer Jane Baggs Publisher: ISBN: 9780662443018 Category : Competition Languages : en Pages : 42
Book Description
"Economists have long held the belief that competition improves efficiency. One of the mechanisms suggested is that product market competition alleviates agency costs, which in turn many enable firms to induce higher effort and greater efficiency from their managers. In this way, competition mitigates what Leibenstein (1966) called 'X-inefficiencies.' Despite growing interest, an unambiguous theoretical formulation for this 'vague suspicion' has proved difficult to obtain. In this paper we examine the impact of competition on efficiency both theoretically and empirically. The main theoretical contribution of this paper is to show that product market competition can have a direct, and ambiguously positive effect on managerial incentives."--Unedited text from document.
Author: Sabri Boubaker
Author: Sabri Boubaker
Author: Gordon M. Phillips
Author: Gordon Martin Phillips
Author: Matthew J. Clayton
Author: Gordon M. Phillips
Author: Teodora Paligorova
Author: Vittoria Cerasi
Author: Jean-Etienne de Bettignies
Author: Sasanee Lovisuth
Author: Jennifer Jane Baggs