Financial structure in oligopoly: Theory and empirical evidence from Korea

Abstract

This chapter examines the linkage between the product market structure and the financial structure of firms in a two-stage Coumot-Nash oligopoly. The firms raise debts in the first stage and then compete in output markets in the second stage. We analyze the effect of the number of firms on their financial structure. It is found that the upper limit to the debts of the firms decreases with the number of firms. That is, the more concentrated the product markets, the more debts the firms can raise. The model is tested empirically using data taken from Korean firms. Empirical test results are found to be weakly in accordance with theoretical predictions.

Citation

Cheong, K. and Lee, S. (2000), "Financial structure in oligopoly: Theory and empirical evidence from Korea", Advances in Applied Microeconomics (Advances in Applied Microeconomics, Vol. 8), Emerald Group Publishing Limited, Leeds, pp. 209-221. https://doi.org/10.1016/S0278-0984(99)08010-4