Capital Structure Under Collusion

Daniel Ferres, Gaizka Ormazabal, Paul Povel and Giorgo Sertsios

No 1608, Documentos de Trabajo/Working Papers from Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo.

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.

Keywords: Capital Structure; Financial Leverage; Financial Policies; Collusion; Cartels; Trigger Strategies (search for similar items in EconPapers)
JEL-codes: G32 L12 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Capital structure under collusion (2021)
Working Paper: Capital Structure Under Collusion (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:mnt:wpaper:1608

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