Debt and firms' relationships: The Italian evidence

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Abstract

Theories that predict the strategic use of debt by players engaged in a vertical relationship are tested using an empirical model of debt usage. It is found that firms selling mainly to other firms are characterised on average by a higher level of debt. No evidence supports the notion that buyers increase their leverage to commit themselves not to behave opportunistically towards their suppliers. The results in the paper also suggest that group organisation limits the incentive to use debt strategically within the holding-subsidiaries relationship.

Original languageEnglish
Pages (from-to)267-282
Number of pages16
JournalReview of Industrial Organization
Volume20
Issue number3
DOIs
Publication statusPublished - 1 May 2002
Externally publishedYes

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