Journal
JOURNAL OF INTERNATIONAL BUSINESS STUDIES
Volume 50, Issue 6, Pages 873-894Publisher
PALGRAVE MACMILLAN LTD
DOI: 10.1057/s41267-019-00225-9
Keywords
globalization; import competition; capital structure; customer-supplier links
Categories
Funding
- Research Grants Council of the HKSAR Government [CityU 21500314]
- City University of Hong Kong [CityU 21500314]
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This paper studies the spillover effect of import competition in downstream industries on upstream capital structure. We find that a large reduction in import tariffs in a customer industry induces suppliers to choose more conservative financial policies. We show that firms lower their leverage more when the customer-supplier relationship is more valuable to the firms and when firms are more vulnerable to the downstream shock. Finally, firms adjust their leverage mainly by issuing more equity.
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