We characterize the optimal financial structure as a strategic de- vice to optimize the value of a firm competing in a market whose struc- ture is endogenous. Contrary to traditional results based on duopolies and depending on the form of competition, we show the general opti- mality of moderate debt financing whenever positive shocks increase the marginal profitability of strategies that reduce prices, indepen- dently from whether they are strategic susbtitutes or complements. We derive the general formulas for the optimal financial structure un- der Cournot and Bertrand competition with endogenous entry and cost uncertainty and extend the results in many directions

Etro, F. (2009). Endogenous Market Structures and Corporate Finance [Working paper del dipartimento].

Endogenous Market Structures and Corporate Finance

ETRO, FEDERICO
2009

Abstract

We characterize the optimal financial structure as a strategic de- vice to optimize the value of a firm competing in a market whose struc- ture is endogenous. Contrary to traditional results based on duopolies and depending on the form of competition, we show the general opti- mality of moderate debt financing whenever positive shocks increase the marginal profitability of strategies that reduce prices, indepen- dently from whether they are strategic susbtitutes or complements. We derive the general formulas for the optimal financial structure un- der Cournot and Bertrand competition with endogenous entry and cost uncertainty and extend the results in many directions
Working paper del dipartimento
Scientifica
Financial structure; Debt; Modigliani-Miller theorem; Endogenous entry
English
Etro, F. (2009). Endogenous Market Structures and Corporate Finance [Working paper del dipartimento].
Etro, F
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/23175
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