Accounting and Control

Capital Structure under Collusion

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We analyze the financial leverage of firms that collude to soften product market competition by forming a cartel. We find that cartel firms have lower leverage during collusion periods. This is consistent with the idea that cartel firms strategically reduce leverage to make their cartels more stable, because high leverage makes deviations from a cartel agreement more attractive. Given that cartels have a large economic footprint, their study is also relevant for the capital structure literature, which has largely ignored the role of anti-competitive behavior.
Bibliographic citation: FERRES, D., ORMAZABAL, G., POVEL, P., SERTSIOS, G. (2021). Capital Structure under Collusion. Journal of Financial Intermediation, 45, Article 100854. doi:10.1016/j.jfi.2020.100854.

Reference: 10.1016/j.jfi.2020.100854 (DOI)
Date: 01/01/2021
Author(s): Daniel Ferres; Gaizka Ormazábal; Paul Povel; Giorgo Sertsios
Document type: Article in Journal (refereed)
Department: Accounting and Control
Languages: English