The Effect of Leverage on Bidding Behavior: Theory and Evidence from the FCC Auctions
This is an exploration of how bidding behavior of firms in various auctions is affected by their capital structure. The theoretical model considers a first-price sealed bid and an English auction. We find that as debt levels increase, firms tend to reduce their bids. The lower bids give the competit...
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| Veröffentlicht in: | The Review of financial studies 2002-07, Vol.15 (3), p.723-750 |
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| container_end_page | 750 |
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| container_title | The Review of financial studies |
| container_volume | 15 |
| creator | Clayton, Matthew J. Ravid, S. Abraham |
| description | This is an exploration of how bidding behavior of firms in various auctions is affected by their capital structure. The theoretical model considers a first-price sealed bid and an English auction. We find that as debt levels increase, firms tend to reduce their bids. The lower bids give the competition incentives to reduce their bids as well. These results are investigated empirically using data from the 1994-1995 FCC spectrum auctions. Consistent with the theoretical model, higher debt levels of the bidding firm and of the competition tend to lead to lower bids. Additional determinants of bidding behavior in these auctions are also analyzed. |
| doi_str_mv | 10.1093/rfs/15.3.723 |
| format | Article |
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Additional determinants of bidding behavior in these auctions are also analyzed.</description><subject>Auctions</subject><subject>Bankruptcy</subject><subject>Bidding</subject><subject>Bids</subject><subject>Bond rating</subject><subject>Business structures</subject><subject>Capital structure</subject><subject>Debt</subject><subject>Enterprises</subject><subject>Finance</subject><subject>Financial leverage</subject><subject>Leverage</subject><subject>Mathematical models</subject><subject>Organizational behavior</subject><subject>Shareholders</subject><subject>Spectrum allocation</subject><subject>Studies</subject><subject>Weighted averages</subject><subject>Zero</subject><issn>0893-9454</issn><issn>1465-7368</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2002</creationdate><recordtype>article</recordtype><recordid>eNpd0E1PAjEQBuDGaCJ-3Dx6aDx4cqHttNutNyWgJiRe4NyUZQpLYIvtQsK_twbjwcxhLk_ezLyE3HHW58zAIPo04KoPfS3gjPS4LFWhoazOSY9VBgojlbwkVymtGWMcJOuR2XSFdOQ91h0Nnk7wgNEtkYaWvjaLRdMu6Suu3KEJ8ZlmG-KRunZBR4dmgW2N1MewpV0OGQ-H9GVfd01o0w258G6T8PZ3X5PZeDQdvheTz7eP4cukqCUXXSFBgZkLgVCVDox3c-1MmccLAO1KLplErueCY-1LgU7Wcp5_kEZVXHsN1-TxlLuL4WuPqbPbJtW42bgWwz5ZMKwCqFSGD__gOuxjm2-zAhhTSkuR0dMJ1TGkFNHbXWy2Lh4tZ_anYJsLtlxZsLngzO9PfJ26EP-syA9obuAbO1R1CQ</recordid><startdate>20020701</startdate><enddate>20020701</enddate><creator>Clayton, Matthew J.</creator><creator>Ravid, S. 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| fulltext | fulltext |
| identifier | ISSN: 0893-9454 |
| ispartof | The Review of financial studies, 2002-07, Vol.15 (3), p.723-750 |
| issn | 0893-9454 1465-7368 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_39083385 |
| source | Business Source Complete; JSTOR Archive Collection A-Z Listing; Oxford University Press Journals All Titles (1996-Current) |
| subjects | Auctions Bankruptcy Bidding Bids Bond rating Business structures Capital structure Debt Enterprises Finance Financial leverage Leverage Mathematical models Organizational behavior Shareholders Spectrum allocation Studies Weighted averages Zero |
| title | The Effect of Leverage on Bidding Behavior: Theory and Evidence from the FCC Auctions |
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