Abstract

http://ssrn.com/abstract=1298328
 
 

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The Effect of Leverage on Bidding Behavior: Theory and Evidence from the Fcc Auctions


Matthew J. Clayton


University of Virginia - McIntire School of Commerce

S. Abraham Ravid


Yeshiva University - Syms School of Business

December 1999

NYU Working Paper No. FIN-99-055

Abstract:     
This paper investigates how firms bidding behavior in various auctions is affected by capital structure. A theoretical model is developed where the first price sealed bid and the English auction are examined. We find as debt levels increase, firms tend to decrease their bids. The lower bids give the competition incentives to decrease their bid as well. These results are then investigated empirically using the recent FCC spectrum auctions. Consistent with the theoretical model, larger debt levels of the bidding firm and the competition tend to lead to lower bids. Additional determinants of bidding behavior in these auctions are also analyzed.

Number of Pages in PDF File: 35

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Date posted: November 11, 2008  

Suggested Citation

Clayton, Matthew J. and Ravid, S. Abraham, The Effect of Leverage on Bidding Behavior: Theory and Evidence from the Fcc Auctions (December 1999). NYU Working Paper No. FIN-99-055. Available at SSRN: http://ssrn.com/abstract=1298328

Contact Information

Matthew J. Clayton (Contact Author)
University of Virginia (UVA) - McIntire School of Commerce ( email )
P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-243-4043 (Phone)
434-924-7074 (Fax)
S. Abraham Ravid
Yeshiva University - Syms School of Business ( email )
United States
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References:  41
Citations:  9

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