How Does Industry Affect Firm Financial Structure?

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ID: 305166
2005
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Abstract
We examine the importance of industry to firm-level financial and real decisions. We find that in addition to standard industry fixed effects, financial structure also depends on a firm's position within its industry. In competitive industries, a firm's financial leverage depends on its natural hedge (its proximity to the median industry capital--labor ratio), the actions of other firms in the industry, and its status as entrant, incumbent, or exiting firm. Financial leverage is higher and less dispersed in concentrated industries, where strategic debt interactions are also stronger, but a firm's natural hedge is not significant. Our results show that financial structure, technology, and risk are jointly determined within industries. These findings are consistent with recent industry equilibrium models of financial structure. Copyright 2005, Oxford University Press.
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openalex_W1965069187 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Peter MacKay, Gordon M. Phillips
Journal review of financial studies
Year 2005
DOI
10.1093/rfs/hhi032
URL
https://doi.org/10.1093/rfs/hhi032
Keywords Keywords not found

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