Leverage and strategic preemption: Lessons from entry plans and incumbent investments
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- 作者：J. Anthony Cookson ; tony.cookson@colorado.edu
- 关键词：Leverage ; Entry threats ; Preemption ; Financial constraints ; Casino industry
- 刊名：Journal of Financial Economics
- 出版年：2017
- 出版时间：February 2017
- 年：2017
- 卷：123
- 期：2
- 页码：292-312
- 全文大小：1538 K
- 卷排序：123
文摘
This paper empirically investigates the effect of leverage on strategic preemption. Using new data on entry plans and incumbent investments from the American casino industry, I find that high leverage prevents incumbents from responding to entry threats. Facing the same set of entry plans, low-leverage incumbents expand physical capacity (by 30%), whereas high-leverage incumbents do not. This difference in investment matters because capacity installations preempt eventual entry. Stock market reactions to withdrawn plans imply that effective preemption increases incumbent firm value by 5%. My findings suggest that leverage matters for industry composition, not just firm-level investment.