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Takanori Tanaka
''Corporate financing and product market competition: evidence from firm-level data in Japan ''
( 2010, Vol. 30 No.2 )
This paper investigates the link between external financing and product market competition by focusing on different maturity structures. Using firm-level data for Japanese manufacturing firms over the period 1990-1995, we find that long-term loans enable firms to compete aggressively at a level below profit maximization. By contrast, short-term loans are not related to product market competition. Our results suggest that long-term loans play an important role in investment in market share for long-term profits through lowering prices.
Keywords: debt financing, price-cost margin
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
G3 - Corporate Finance and Governance: General
Manuscript Received : Jul 28 2009 Manuscript Accepted : May 16 2010

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