Title: Product market competition and credit risk
Authors: Huang, Hsing-Hua
Lee, Han-Hsing
資訊管理與財務金融系
註:原資管所+財金所

Department of Information Management and Finance
Keywords: Product market competition;Credit risk;Structural model;Hazard model
Issue Date: 1-Feb-2013
Abstract: This study theoretically and empirically investigates effects of product market competition on credit risk. We first develop a real-options-based structural model in a homogeneous oligopoly and show that credit spreads are positively related to the number of firms in an industry. The disparity of firm size in an industry is relevant to both product market competition and credit risk, and we therefore extend the model to an asymmetric duopoly case. In particular, we demonstrate that credit spreads of relatively small (large) firms within an industry are positively (negatively) related to Herfindahl-Hirschman index, and the relative firm size in an industry is an important determinant of credit risk. The models' implications are empirically scrutinized by a reduced-form hazard model and generally supported. By performing out-of-sample analyses, the results demonstrate that firm size together with the interaction terms between intra-industry firm size dummies and competition intensity can effectively predict default. (C) 2012 Elsevier B.V. All rights reserved.
URI: http://dx.doi.org/10.1016/j.jbankfin.2012.09.001
http://hdl.handle.net/11536/21104
ISSN: 0378-4266
DOI: 10.1016/j.jbankfin.2012.09.001
Journal: JOURNAL OF BANKING & FINANCE
Volume: 37
Issue: 2
Begin Page: 324
End Page: 340
Appears in Collections:Articles


Files in This Item:

  1. 000312979100007.pdf

If it is a zip file, please download the file and unzip it, then open index.html in a browser to view the full text content.