Product Market Competition and Capital Structure Decisions

This thesis consists of two empirical chapters on product market competition and capital structure decisions. In Chapter II, we find that competitive threats are positively associated with the use of convertible debt financing as the possibility of conversion enhances financial flexibility. In Chapter III, we explore operating performance following new equity issues under the theoretical framework of Lyandres (2008), which predicts inferior operating performance of issuers relative to their rivals as SEOs translate into a larger decline in profitability for the former than for the latter. Our empirical results support the predictions in Lyandres (2008).