Life after Cartels: Deleveraging versus the Strategic Use of Debt

Research Interest
We consider the case of changing competition that comes from stronger antitrust enforcement around the world to show that more intense strategic competition and expanding output leads to lower debt levels, driven primarily by higher equity issuances to fund new investment. These results are more consistent with theories that emphasize the importance of financial flexibility in surviving competitive threats than those that suggest that debt has strategic value in influencing product market outcomes. Our identification relies on difference-in-difference estimation based on a staggered passage of leniency laws in 63 countries around the world over 1990-2012.