December 2008
Intermediate to advanced
520 pages
43h 42m
English
Chris Parsons McGill University
Sheridan Titman University of Texas
In this chapter we review and discuss empirical studies that examine how a firm’s financing choice affects its strategic decisions and relationships with its nonfinancial stakeholders, such as its customers or workforce. Generally, high leverage appears to inhibit a firm’s ability or willingness to compete aggressively, especially against well-financed competitors. Debt also disciplines the manager–worker relationship, preventing managers from hoarding labor during economic downturns. Many of the studies also indicate that the firm’s relationships with its customers can be disrupted by concerns over the firm’s long ...