Anticompetitive Leverage: Revisiting the Strategic Use of Debt

25 Pages Posted: 30 Oct 2018

See all articles by Paolo Siciliani

Paolo Siciliani

UCL Faculty of Laws; Bank of England

Date Written: October 2017

Abstract

Capital structure and financial policies can raise anticompetitive concerns to the extent that they induce rival firms to compete less aggressively. In contrast to common ownership, anticompetitive concerns triggered by financial leverage being ratcheted up in parallel across rival firms can be the result of legitimate prudent underwriting standards that mechanically steer managers to adopt a softer competitive stance in order to secure debt refinancing. By the same token, increasing leverage in parallel can be opportunistically deployed by rival firms to coordinate and sustain a tacitly collusive agreement. A close scrutiny of the existing theoretical and empirical literature is supportive of this antitrust theory of harm.

Keywords: capital structure; financial leverage; oligopoly; product market interaction; collusion

JEL Classification: D21; G32; L13; L41

Suggested Citation

Siciliani, Paolo, Anticompetitive Leverage: Revisiting the Strategic Use of Debt (October 2017). Available at SSRN: https://ssrn.com/abstract=3261938 or http://dx.doi.org/10.2139/ssrn.3261938

Paolo Siciliani (Contact Author)

UCL Faculty of Laws ( email )

Bentham House
Endsleigh Gardens
London, WC1H 0EG
United Kingdom

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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