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Corporate financing and product market competition: evidence from firm-level data in Japan

Author

Listed:
  • Takanori Tanaka

    (Institute of Social and Economic Research, Osaka University)

Abstract

This paper investigates the link between external financing and product market competition by focusing on different maturity structures. Using firm-level data for Japanese manufacturing firms over the period 1990-1995, we find that long-term loans enable firms to compete aggressively at a level below profit maximization. By contrast, short-term loans are not related to product market competition. Our results suggest that long-term loans play an important role in investment in market share for long-term profits through lowering prices.

Suggested Citation

  • Takanori Tanaka, 2010. "Corporate financing and product market competition: evidence from firm-level data in Japan," Economics Bulletin, AccessEcon, vol. 30(2), pages 1373-1383.
    • Handle: RePEc:ebl:ecbull:eb-09-00440
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P127.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    debt financing; price-cost margin;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G3 - Financial Economics - - Corporate Finance and Governance

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