Strategic use of corporate debt under product market competition : theory and evidence

Financial and industrial economists are increasingly recognising the interaction between capital structure and firms' strategies in the product market. A debate exists regarding the nature of the relationship between firms' product market power and financial leverage. Particularly, researchers have asked whether the relationship is positive, negative or non-linear. This thesis contributes to this research agenda by developing game-theoretic models, and conducting empirical tests. Specifically, the thesis examines the effects of market power on a firm's use of long-term debt.