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Capital Structure and Product Market Strategy

Author

Listed:
  • Chong-en Bai

    (Boston College)

  • Shan Li

Abstract

This paper develops a general framework to analyze the relationship between a firm's capital structure and its product market strategy and presents a taxonomy of whether debt makes a firm tough or soft in product market competition and how strategic considerations affect the leverage of a firm based on the nature of the firm's agency problem and the characteristics of the product market. We then review the related literature and point out unexplored linkages between capital structure and product market strategies. Finally, we discuss the empirical implications of our theoretical results.

Suggested Citation

  • Chong-en Bai & Shan Li, 1994. "Capital Structure and Product Market Strategy," Boston College Working Papers in Economics 279, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:279
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    Cited by:

    1. Comin Diego A, 2006. "Using Investment Data to Assess the Importance of Price Mismeasurement," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-42, April.
    2. Zaumanis, Martins & Mallick, Rajib B. & Frank, Robert, 2014. "100% recycled hot mix asphalt: A review and analysis," Resources, Conservation & Recycling, Elsevier, vol. 92(C), pages 230-245.
    3. Amable, Bruno & Ledezma, Ivan & Robin, Stéphane, 2016. "Product market regulation, innovation, and productivity," Research Policy, Elsevier, vol. 45(10), pages 2087-2104.
    4. Dasgupta, Sudipto & Titman, Sheridan, 1998. "Pricing Strategy and Financial Policy," The Review of Financial Studies, Society for Financial Studies, vol. 11(4), pages 705-737.
    5. Shih, Han M., 2014. "Migrating product structure bill of materials Excel files to STEP PDM implementation," International Journal of Information Management, Elsevier, vol. 34(4), pages 489-516.
    6. McClure, James & Kumcu, Erdogan, 2008. "Promotions and product pricing: Parsimony versus Veblenesque demand," Journal of Economic Behavior & Organization, Elsevier, vol. 65(1), pages 105-117, January.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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