主讲人：Qiaohai Hu,Assistant Professor, University of Missouri St. Louis
摘要：Existing literature demonstrates that because of the limited liability effect of debt financing, debt financed firms will compete with each other more aggressively than equity financed ones. However, it is not clear how supply chain structure may affect this result. To address this problem, this paper investigates the impacts of two supply chain structures: the competing retailers source from a common supplier or two dedicated suppliers. The analysis shows that the dedicated suppliers lower their wholesale prices to induce their retailers to compete more aggressively when at least one retailer borrows, whereas the common supplier keeps wholesale prices invariant to the downstream retailers' debt. Hence, the competition intensifying effect of debt financing is more pronounced, the retailers borrow more and incur a high default risk under the former supply chain structure than the latter one. Although the retailers are worse off than not borrowing, the upstream supplier(s) benefits from the downstream retailers' borrowing because it sells more. Interestingly, in an asymmetric setting where only one retailer is leveraged, the leveraged retailer obtains a first-mover like advantage, and this advantage trickles up to the leveraged retailer's supplier when the retailers source from two different suppliers. The presence of financial distress costs curtails the retailers' incentives to borrow, and thereby mitigates the product market competition enhancing effect of debt financing, and may actually improve rather lower the retailers' profits. However, because financially distress costs exert a negative externality on the supply chains, they reduce the upstream's profit, force them to lower prices, and sell less to the retailers under both supply chain structures. Additionally, I find that the retailers' debt is a U-shaped function of the degree of product substitution, and that the debt level is monotonically decreasing in the coefficient of demand variability, and so are the retailers' default probabilities.