Buyer-Supplier Relationships and the Stakeholder Theory of Capital Structure

Firms in bilateral relationships are likely to produce or procure unique products—especially when they are in durable goods industries. Consistent with the arguments of Titman and Titman and Wessels, such firms are likely to maintain lower leverage. We compile a database of firms' principal customers (those that account for at least 10% of sales or are otherwise considered important for business) from the Business Information File of Compustat and find results consistent with the predictions of this theory.

[1]  Kathryn E. Spier,et al.  Capital Structure as a Bargaining Tool: The Role of Leverage in Contract Renegotiation , 1993 .

[2]  Asli Demirgüç-Kunt,et al.  Institutions, Financial Markets and Firm Debt Maturity , 1996 .

[3]  Sheridan Titman,et al.  Pricing Strategy and Financial Policy , 1996 .

[4]  Sheridan Titman,et al.  The effect of capital structure on a firm's liquidation decision☆ , 1984 .

[5]  M. Arellano,et al.  Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations , 1991 .

[6]  Judith A. Chevalier,et al.  Capital Structure and Product-Market Competition: Empirical Evidence from the Supermarket Industry , 1995 .

[7]  S. Titman,et al.  Financial Policy and Reputation for Product Quality , 1991 .

[8]  Dmitry Livdan,et al.  Debt, bargaining, and credibility in firm-supplier relationships , 2009 .

[9]  Ilya A. Strebulaev,et al.  Do Tests of Capital Structure Theory Mean What They Say? , 2004 .

[10]  J. MacKinnon,et al.  Estimation and inference in econometrics , 1994 .

[11]  Manohar U. Kalwani,et al.  Long-Term Manufacturer-Supplier Relationships: Do They Pay off for Supplier Firms? , 1995 .

[12]  P. Joskow.  Asset Specificity and the Structure of Vertical Relationships: Empirical Evidence , 1988 .

[13]  P. Grout,et al.  Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach , 1984 .

[14]  C. Fee,et al.  Sources of Gains in Horizontal Mergers: Evidence from Customer, Supplier, and Rival Firms , 2003 .

[15]  Peter Schmidt,et al.  Efficient estimation of models for dynamic panel data , 1995 .

[16]  Murillo Campello,et al.  Product Market Performance, Switching Costs, and Liquidation Values: The Real Effects of Financial Leverage , 2006 .

[17]  Cheng Hsiao,et al.  Estimation of Dynamic Models with Error Components , 1981 .

[18]  Shantanu Banerjee,et al.  Buyer-Supplier Relationships and Trade Credit , 2004 .

[19]  S. Titman,et al.  Financial Policy and a Firm's Reputation for Product Quality , 1989 .

[20]  Jayant R. Kale,et al.  Corporate Capital Structure and the Characteristics of Suppliers and Customers , 2007 .

[21]  D. Scharfstein,et al.  Capital Market Imperfections and Countercyclical Markups: Theory and Evidence , 1994 .

[22]  Kunal Sengupta,et al.  Sunk investment, bargaining, and choice of capital structure , 1993 .

[23]  Stephen G. Bronars,et al.  The Threat of Unionization, the Use of Debt, and the Preservation of Shareholder Wealth , 1991 .

[24]  E. Fama,et al.  Testing Tradeoff and Pecking Order Predictions About Dividends and Debt , 2000 .

[25]  Murray Z. Frank,et al.  Testing the Pecking Order Theory of Capital Structure , 2000 .

[26]  Sheridan Titman,et al.  Financial markets and corporate strategy , 1997 .

[27]  The Role of Debt in Procurement Contracts , 1996 .

[28]  Mark T. Leary,et al.  Do Firms Rebalance Their Capital Structures? , 2004 .

[29]  S. Titman,et al.  Financial Distress and Corporate Performance , 1994 .

[30]  S. Dasgupta,et al.  Bargaining, Bonding, and Partial Ownership , 2000 .

[31]  Sheridan Titman,et al.  The Determinants of Capital Structure Choice , 1988 .

[32]  J. MacKinnon,et al.  Estimation and inference in econometrics , 1994 .

[33]  Murillo Campello,et al.  Capital Structure and Product Markets Interactions: Evidence from Business Cycles , 2001 .

[34]  Charles J. Hadlock,et al.  Corporate Equity Ownership and the Governance of Product Market Relationships , 2005 .