Work

Collusion through debt and managers

Year: 2026

Type: article

Abstract: We investigate the anticompetitive effects of debt financing and managerial incentives in the presence of managers incurring personal bankruptcy costs. We characterize the strategic value for firms' shareholders of resorting to debt and managerial incentives as complementary devices to sustain collusion among firms, when managerial bankruptcy costs are sufficiently responsive to the severity of financial distress. The shareholders' inability to commit to debt and managerial contracts implies that common lending to different firms constitutes a key driver for collusion. These results square with the well‐documented empirical evidence on debt financing, managerial incentives, and common lending in sectors plagued by collusion.

Source: Canadian Journal of Economics/Revue canadienne d économique

DOI: 10.1111/caje.70086

Authors: Raffaele Fiocco, Salvatore Piccolo, Giancarlo Spagnolo

Institutions: University of Bergamo, University of Rome Tor Vergata, Einaudi Institute for Economics and Finance, Stockholm School of Economics, Centre for Economic Policy Research

Language: English

Topic: Merger and Competition Analysis

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,120

OpenAlex ID: W4293210570

FWCI:

Cites: 80

Cited by:

Related to: 10