Industry Structure of Debt and Market Share Leadership Persistence

Accounting and Finance Research, Vol 4(1), 2015

DOI: 10.5430/afr.v4n1p92

11 Pages Posted: 24 Mar 2020

See all articles by Donna L. Paul

Donna L. Paul

Washington State University

Gulnara R. Zaynutdinova, Ph.D.

West Virginia University, Department of Finance

Date Written: 2014

Abstract

This study investigates the relationship between the industry structure of debt and market share leadership persistence using a large sample of firms spanning the years 1961-2012. We construct unique variables that measure the structure of industry leverage and conduct tests for the relationship between these variables and the likelihood that firms retain market share leadership from year to year. Results show that firms in industries with high capital structure diversity are more likely to maintain market share leadership over time, indicating that heterogeneity in capital structure among industry incumbents facilitates the strategic use of leverage to secure and maintain a leadership position. We also find that firms with higher and more stable leverage ratios are more likely to maintain their leadership, suggesting that firms use debt financing to invest in market share growth. The results highlight the importance of firm- and industry-level debt structures in product market leadership positioning and provide a new perspective on intra-industry rivalry.

Keywords: Capital Structure, Leverage, Market Share, Industry Structure, Leadership

JEL Classification: G32

Suggested Citation

Paul, Donna L. and Zaynutdinova, Gulnara R., Industry Structure of Debt and Market Share Leadership Persistence (2014). Accounting and Finance Research, Vol 4(1), 2015 , DOI: 10.5430/afr.v4n1p92, Available at SSRN: https://ssrn.com/abstract=3527817

Donna L. Paul (Contact Author)

Washington State University ( email )

Carson College of Business
WA
United States

Gulnara R. Zaynutdinova

West Virginia University, Department of Finance ( email )

Morgantown, WV 26506
United States

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