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Capital Structure And Product Markets Interactions
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Book Synopsis Capital Structure and Product Markets Interactions by : Murillo Campello
Download or read book Capital Structure and Product Markets Interactions written by Murillo Campello and published by . This book was released on 2002 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides firm- and industry-level evidence on the effects of capital structure on product market outcomes for a large cross-section of industries. The analysis uses shocks to aggregate demand as surrogates for exogenous changes in the product market environment, dealing with concerns about the endogenous nature of the relation between financial structure and competitive performance. I find that debt financing has a negative impact on firm (relative-to-industry) sales growth in industries where rivals are relatively unlevered during recessions, but not during booms. In contrast, no such effects are observed for firms competing in high-debt industries. At the industry level, I find that markups are more countercyclical when industry debt is high. The cyclical dynamics I find for firm sales growth and for industry markups are consistent with Chevalier and Scharfstein's (1996) prediction that firms that rely more heavily on external financing are more prone to boost short-term profits at the expense of future sales in response to negative shocks to demand, and that the competitive outcomes resulting from such actions depend on the financial structures of their industry rivals.
Book Synopsis The Role of Creditor Rights on Capital Structure and Product Market Interactions by : Sadok El Ghoul
Download or read book The Role of Creditor Rights on Capital Structure and Product Market Interactions written by Sadok El Ghoul and published by . This book was released on 2020 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: An extensive body of international business research examines how cross-country variations in legal institutions influence corporate finance practices. Building on this literature, as well as the literature on capital structure and product market interactions, we investigate the effect of an important dimension of legal institutions - creditor rights - on the product market performance of highly leveraged firms. Using a sample of 37,422 firms from 60 countries over the 1989-2016 period, we find that strong creditor protection benefits less leveraged firms, but adversely affects highly leveraged firms by increasing the adverse responses of customers, competitors, and employees. The adverse effect of creditor rights on the costs of high leverage is more pronounced for firms in countries with developed debt markets and banking systems, but mostly insignificant for firms in countries with developed equity markets and low information asymmetry. Our study offers new insights to the international business literature and contributes to the debate on the role of creditor protection by uncovering a potential cost based on capital structure and product market interactions.
Book Synopsis Capital Structure by : Ahmed Riahi-Belkaoui
Download or read book Capital Structure written by Ahmed Riahi-Belkaoui and published by Praeger. This book was released on 1999-02-28 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt: This text uses theoretical and contingency approaches to examine the question of whether capital structure can be determined. Using a bond rating model it looks at the evaluation of capital structure, the resolution of issues pertaining to equity and liabilities, and their contribution to reports
Book Synopsis Firm's Capital Structure and Factor-Product Markets by : Abdulaziz Istaitieh
Download or read book Firm's Capital Structure and Factor-Product Markets written by Abdulaziz Istaitieh and published by . This book was released on 2003 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this work is to offer a theoretical overview of the literature that links capital structure and factor-product markets, in order to show what we do know about these connections. This literature relates some elements of the modern financial theory to the stakeholder theory, industrial organization, and firm's strategic management. Three main points could be highlighted. First, the relevant role of non-financial stakeholders in capital structure design. Second, the interactions existing between capital structure and market structure. Third, the two-direction effect between the firm's capital structure and its strategic behavior in product markets.
Book Synopsis Capital Structure, Product Market Dynamics, and the Boundaries of the Firm by : Dirk Hackbarth
Download or read book Capital Structure, Product Market Dynamics, and the Boundaries of the Firm written by Dirk Hackbarth and published by . This book was released on 2014 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study how interactions between financing and investment decisions can shape firm boundaries in dynamic product markets. In particular, we model a new product market opportunity as a growth option and ask whether it is best exploited by a large incumbent firm (Integration) or by a separate, specialized firm (Non-Integration). Starting from a standard theoretical framework, in which value-maximizing corporate investment and financing decisions are jointly determined, we show that Integration best protects assets in place value, while Non-Integration best protects the value of the growth option and maximizes financial flexibility. These forces drive different organizational equilibria depending on firm and product market characteristics. In particular, we show that increases in standard measures of cash flow risk predict exploitation of new opportunities by specialized firms, while increases in product market risk (i.e., the risk of preemption by competitors) predict exploitation by incumbents. We also show that alliances organized as licensing agreements or revenue sharing contracts sometimes better balance the different sources of value, and thus may dominate more traditional forms of organization. These key results arise from the dynamic interaction of the new opportunity's option-like features with realistic competitive forces.The appendices for this paper are available at the following URL: "http://ssrn.com/abstract=2443868" http://ssrn.com/abstract=2443868.
Book Synopsis The Interaction of Capital Structure and Product-market Behaviour by : Carl O'Donnell
Download or read book The Interaction of Capital Structure and Product-market Behaviour written by Carl O'Donnell and published by . This book was released on 2003 with total page 149 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Relationship between Capital Structure and Product Markets by : David J. Smith
Download or read book The Relationship between Capital Structure and Product Markets written by David J. Smith and published by . This book was released on 2012 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate whether the capital structure of New Zealand firms influences their product-market performance in the period from 1984 to 2008. Our main findings are that the use of leverage by publicly listed New Zealand companies leads to an increase in relative-to-industry sales growth, but a decrease in relative-to-industry return on assets (ROA). We also conduct a reverse causality test by examining whether sales growth and ROA influence leverage. We find no evidence that sales growth has an impact on the use of debt, but significant evidence that ROA is negatively correlated with its use. Our results suggest that New Zealand firms use debt to compete more aggressively in their product markets, even though this strategy comes at a cost of lower relative-to-industry profitability. A possible explanation for this behaviour is the more competitive trading environment that has developed in New Zealand over the last 25 years.
Book Synopsis Stakeholder Theory, Market Structure and the Firm's Capital Structure by : Abdulaziz Istaitieh
Download or read book Stakeholder Theory, Market Structure and the Firm's Capital Structure written by Abdulaziz Istaitieh and published by . This book was released on 2014 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new literature linking capital structure and factor-product markets has been under focus in the last few years. This literature relates some elements of the modern financial theory to the stakeholder theory, market structure, and firm's strategic behavior. In this paper, we will examine the interactions between capital structure and factor-product markets through a system of simultaneous equations with panel data. Our data set contains a sample of Spanish manufacturing firms between 1993 and 1999. We specify a financial leverage equation that depends mainly on factor-product markets. Moreover, we specify a second equation to analyze how product market concentration is affected by financial leverage, among other things. Finally, capital structure was empirically showed to affect and be affected by factor-product markets.
Book Synopsis Increased Debt and Product Market Competition by : Gordon M. Phillips
Download or read book Increased Debt and Product Market Competition written by Gordon M. Phillips and published by DIANE Publishing. This book was released on 1993-07 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tests whether capital structure influences product market competition between firms that have sharply increased the debt in their capital structure.
Book Synopsis Capital Structure and Factor-product Markets by : Abdulaziz M. Istaitieh
Download or read book Capital Structure and Factor-product Markets written by Abdulaziz M. Istaitieh and published by . This book was released on 2003 with total page 309 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Does Corporate Social Responsibility Reduce the Costs of High Leverage? Evidence from Capital Structure and Product Market Interactions by : Kee-Hong Bae
Download or read book Does Corporate Social Responsibility Reduce the Costs of High Leverage? Evidence from Capital Structure and Product Market Interactions written by Kee-Hong Bae and published by . This book was released on 2019 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research on capital structure and product market interactions shows that high leverage is associated with substantial losses in market share due to unfavorable actions by customers and competitors. We examine whether corporate social responsibility (CSR) affects firms' interactions with customers and competitors, and whether it can reduce the costs of high leverage. We find that CSR reduces losses in market share when firms are highly leveraged. By reducing adverse behavior by customers and competitors, CSR helps highly leveraged firms keep customers and guard against rivals' predation. Our results support the stakeholder value maximization view of CSR.
Book Synopsis Optimal Capital Structure, Capacity Choice and Product Market Competition by : Yongqiang Chu
Download or read book Optimal Capital Structure, Capacity Choice and Product Market Competition written by Yongqiang Chu and published by . This book was released on 2010 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a dynamic trade-off model to study the interaction between product market competition and capital structure. Firms make interdependent entry, investment, financing and default decisions. Trade-off between tax benefits, bankruptcy costs and strategic considerations in the product market determines optimal capital structure. The model delivers the following results that are consistent with empirical evidences: (1) Firms may have non-linear and non-monotonic reactions to their competitors' change of leverage, depending on their original levels of leverage; (2) The within-industry variation of leverage can be large, because incumbents and entrants use leverage strategically differently; (3) Entrants have higher leverage than incumbents in equilibrium, because the incumbents use lower leverage to gain strategic advantages over the entrants.
Book Synopsis Capital Structure and Product-market Behavior by : Judith A. Chevalier
Download or read book Capital Structure and Product-market Behavior written by Judith A. Chevalier and published by . This book was released on 1995 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Study on Capital Structure and Corporate Governance by : Ryoonhee Kim
Download or read book A Study on Capital Structure and Corporate Governance written by Ryoonhee Kim and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Capital structure and corporate governance are the important areas that represent salient part of corporate finance research. By studying various aspects of the two areas, this study attempts to deepen our understanding of the two. First, this study provides both a theoretical model and empirical evidence on the interaction between capital structure and managerial incentive compensation (one of key measures of corporate governance). Researchers acknowledge that the two interact to each other and the interaction should affect their optimal determination, but few studies formally consider the interaction. This study shows that due to the interaction through agency conflicts, key firm characteristics that represent agency costs affect leverage and managerial incentive compensation in opposite directions. After controlling for the opposite interactions, the two are shown to be positively related. Second, this study provides empirical evidence on the interaction between financial structure and product market performance by examining business group affiliated firms. The firms that are affiliated to a business group is not only affected by their own financial position, but also affected by the position of business groups which the firms belong to. The empirical investigation suggests that affiliated firms lose market shares to their rivals in their product market when their business group is financially weak due to high group leverage. Third, this study examines whether special governance structure of business groups is actually beneficial to the groups0́9 member firms. The study exploit unique dataset of firms that were once stand alone, but later acquired by business groups. The empirical methodology we employ can account for the fact that the firms which are acquired by business groups can be very different from other firms which are not acquired. The findings from matching estimator suggest that performance increase of the acquired firms is significantly greater than the performance of matched stand alone firms, implying that business groups are actually helping their affiliated firms to perform better than stand alone firms.
Book Synopsis Capital Structure and Product Market Behavior by : Daniel J. Kovenock
Download or read book Capital Structure and Product Market Behavior written by Daniel J. Kovenock and published by . This book was released on 1995 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Debt Financing by : Murillo Campello
Download or read book Debt Financing written by Murillo Campello and published by . This book was released on 2005 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research on capital structure-product market interactions has traditionally sought to establish whether debt financing either hurts or boosts firm performance. This paper proposes that both of these competitive outcomes are likely to emerge in an industry setting: debt can hurt and boost a firm's product market performance. To motivate this case, I analyze a simple model implying a non-monotonic relation between a firm's use of external (debt-like) financing and its competitive conduct. I then empirically examine the within-industry relation between corporate debt and sales performance using firm-level data from a panel of 115 industries over 30 years. The testing strategy I implement allows for the marginal effect of debt policies on product market outcomes to vary according to the level of firm/rival indebtedness. Crucially, it addresses concerns with the endogeneity of financing decisions in a novel fashion: I use creditors' valuation of firms' assets in liquidation to identify financial leverage in an empirical model of product market performance. My evidence suggests that moderate (relative-to-industry) firm debt taking is, on the margin, associated with sales gains that obtain at the expense of industry rivals. After some point, however, higher relative indebtedness leads to significant sales underperformance. I also investigate whether financing-performance linkages vary with industry concentration and with firm leadership (market share size). I find that leader (follower) firms in concentrated industries underperform (outperform) their rivals when those firms' leverage ratios exceed the industry norm. In contrast, less leveraged leaders in those same industries observe positive sales-debt sensitivities. Firm debt and leadership positions are less relevant for competitive outcomes in less concentrated markets.
Book Synopsis Capital Structure and Interaction Among Firms in Output Markets - Theory and Evidence by : Evgeny Lyandres
Download or read book Capital Structure and Interaction Among Firms in Output Markets - Theory and Evidence written by Evgeny Lyandres and published by . This book was released on 2013 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: I develop a simple model that examines the relations between the extent of competitive interaction among firms in output markets, their capital structures, and the aggressiveness of their operating strategies. A firm's optimal leverage is related to the degree to which its operating strategy affects its rivals' value functions and resulting optimal output market choices. This relation is positive, regardless of whether the competition in output markets is in strategic substitutes or in strategic complements. I test the model's prediction using two proxies for the extent of competitive interaction among firms. The empirical evidence, obtained using 54 years of Compustat data, provides a strong support for the model.
