How Does Industry Affect Firm Financial Structure ?

  title={How Does Industry Affect Firm Financial Structure ?},
  author={Peter Mackay and G. M. Phillips},
We examine the importance of industry to firm-level financial and real decisions. We find that in addition to standard industry fixed effects, financial structure also depends on a firm’s position within its industry. In competitive industries, a firm’s financial leverage depends on its natural hedge (its proximity to the median industry capital–labor ratio), the actions of other firms in the industry, and its status as entrant, incumbent, or exiting firm. Financial leverage is higher and less… CONTINUE READING
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