ON SOME IMPLICATIONS OF DEBT FINANCING WITH LIMITED LIABILITY

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概要

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• This paper extends the results of Brander and Lewis (1986). It derives the reaction functions when firms are debt financed with limited liability. It shows with the help of an example that reaction functions which are downward sloping when firms are completely equity financed may become upward sloping if firms are debt financed with limited liability. Then it shows that for firms with limited liability certain standard results do not follow. In this respect it recasts Dixit (1980) in a limited liability framework and shows that firms can keep excess capacity to deter entry even if the products are strategic substitutes when they are completely equity financed. A couple of examples are provided to show that imposition of tariff may lead to either to an increase in domestic country's imports or to no change in imports if the foreign firm is debt financed with limited liability. Had the foreign firm been completely equity financed then in both the examples imposition of tariff would have decreased imports as normally expected.

• 慶應義塾大学の論文

著者

• Sengupta Kunal

  Jawaharlal Nehru University

• DASTIDAR Krishnendu

  Harvard University

• Dastidar Krishnendu

  Harvard University : Jawaharlal Nehru University

関連論文

• ON SOME IMPLICATIONS OF DEBT FINANCING WITH LIMITED LIABILITY

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