Product flexibility of competitive manufactures: the effect of debt financing

Springer Science and Business Media LLC - Tập 307 Số 1 - Trang 53-74 - 2021
Cao, Guozhao1, Wang, Zhan1
1School of Economics and Management, Shanxi University, Taiyuan, China

Tóm tắt

The goal of this paper was to examine the effect of debt financing on competitive manufactures’ product flexible capacity decisions. For this purpose, two competing firms were considered to invest in product flexible capacity and product dedicated capacity, respectively, each of them produced two products. Before investing in the capacity, each firm issues the optimal amount of debt. The product flexible capacity decision models of both levered firms and unlevered firms were built based on the competitive newsvendor model. Then the relationship between debt financing and product flexibility decision was discussed. The results indicated that under the competitive setting, the level of product flexibility decreased with debt as well as the difference of demand between the two products. Furthermore, the optimal capacity investment and debt of levered firms decreased with product flexibility. Finally, the firm could benefit from higher debt and total capacity investment when the product profit margin is large.

Tài liệu tham khảo

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