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COST OF CAPITAL AND MARKET POWER - THE EFFECT OF SIZE DISPERSION AND ENTRY BARRIERS ON MARKET EQUILIBRIUM
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UNSPECIFIED (1995) COST OF CAPITAL AND MARKET POWER - THE EFFECT OF SIZE DISPERSION AND ENTRY BARRIERS ON MARKET EQUILIBRIUM. SMALL BUSINESS ECONOMICS, 7 (3). pp. 205-212.
Research output not available from this repository, contact author.Abstract
A market power explanation for the observed empirical fact that large firms in a given industry pay less for their capital than small is developed. Larger firms in an industry are shown to pay less for their capital than small because they have more control over the market and the riskiness of their divided stream is correspondingly smaller. More firms in an industry with a given size dispersion raises the cost of capital to the incumbents, but proportionately more to smaller firms. However, the most significant result is that a greater dispersion of sizes will reduce the riskiness of the dividend stream of the larger firm and increase the riskiness of the smaller firm, causing an increase in the dispersion of capital costs. Hence product market power enhances capital cost efficiencies.
| Item Type: | Journal Article | ||||
|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HF Commerce H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management |
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| Journal or Publication Title: | SMALL BUSINESS ECONOMICS | ||||
| Publisher: | KLUWER ACADEMIC PUBL | ||||
| ISSN: | 0921-898X | ||||
| Official Date: | June 1995 | ||||
| Dates: |
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| Volume: | 7 | ||||
| Number: | 3 | ||||
| Number of Pages: | 8 | ||||
| Page Range: | pp. 205-212 | ||||
| Publication Status: | Published |
Data sourced from Thomson Reuters' Web of Knowledge
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