Debt financing and market concentration in an emerging economy: firm-level evidence from India

This study has empirically tested the relation between leverage and market concentration using a balanced panel data on 1469 firms over 26 manufacturing industries during 2001-2016 in the context of India. Our regression results indicate that competition has an overall negative effect on leverage. The negative effect of competition on leverage is intensified with larger firm size and larger growth opportunities. Finally, we examine whether the relationship between leverage and competition is non-monotonic. Our results show no important departure from linearity while using HHI but support the cubic relationship while using Tobin's q. Different tests of robustness support our results.