Loughborough University
Leicestershire, UK
LE11 3TU
+44 (0)1509 263171
Loughborough University

Loughborough University Institutional Repository

Please use this identifier to cite or link to this item: https://dspace.lboro.ac.uk/2134/2070

Title: Strategic debt in vertical relationships: theory and evidence
Authors: De Fraja, Gianni
Piga, Claudio
Issue Date: 2004
Publisher: © Elsevier
Citation: DE FRAJA, G. and PIGA, C., 2004. Strategic debt in vertical relationships: theory and evidence. Research in Economics, 58, pp. 103-123.
Abstract: We model a vertical relationship between two firms. Our main finding is that the downstream firm manipulates the extent of its debt in order to affect in its favour the contract offered by the upstream firm. Except for a very high interest rate, we find a conflict of interest between the two firms with regard to the extent of debt. This can be interpreted as a rationale for the constraint imposed by franchisors on the debt level of their franchisees. The theoretical analysis is tested using a dataset combining both survey and balance sheet data. We find evidence suggesting that debt may play a strategic role for those firms involved in close-knit vertical relationships.
Description: This is Restricted Access. This article was published in the journal, Research in Economics [© Elsevier] and is available at: http://www.sciencedirect.com/science/journal/10909443.
URI: https://dspace.lboro.ac.uk/2134/2070
ISSN: 1090-9443
Appears in Collections:Closed Access (Economics)

Files associated with this item:

File Description SizeFormat
Defraja_piga%2bresearch%2beconomics.pdf229.1 kBAdobe PDFView/Open


SFX Query

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.