Tuesday, October 31, 2017

Capital Structure Under Collusion

Ferrés, Daniel ; Ormazabal, Gaizka ; Povel, Paul ; Sertsios, Giorgio study Capital Structure Under Collusion.

ABSTRACT: We study the financial leverage of firms that collude by forming a cartel. We find that cartel firms have lower leverage ratios during collusion periods, consistent with the idea that reductions in leverage help increase cartel stability. Cartel firms have a surprisingly large economic footprint (they represent more than 20% of the total market capitalization in the U.S.), so understanding their decisions is relevant. Our findings show that anti-competitive behavior has a significant effect on capital structure choices. They also shed new light on the relation between profitability and financial leverage.


| Permalink


Post a comment