TY - THES ID - 134594979 TI - Market Power: How it affects financing decisions AU - Sebrechts, Lies AU - Smedts, Kristien AU - Darbari, Nima AU - KU Leuven. Faculteit Economie en Bedrijfswetenschappen. Opleiding Master in de toegepaste economische wetenschappen (Leuven) PY - 2016 PB - Leuven KU Leuven. Faculteit Economie en Bedrijfswetenschappen DB - UniCat UR - https://www.unicat.be/uniCat?func=search&query=sysid:134594979 AB - The discussion about the determinants of a firm’s financial structure is an ongoing issue in academic literature and is of major importance for business people. Prior literature shows that market power may play a key role in the determination of a firm’s financing strategy. One explanation given by previous studies, is the decreased stock return volatility and the increased stock market liquidity associated with more market power, which may negatively affect a firm’s debt ratio. Another explanation found in prior research is the increased use of trade credit, derived from a higher value of accounts payable and a lower value of accounts receivable, related to market power. However, profound research in this area is relatively scarce. Therefore, the main question of this study is whether the effect of market power on a firm’s debt ratio is fully or only partly explained by stock return volatility and stock market liquidity. A sample consisting out of 573 European manufacturing firms for the period 2005 to 2014 is retrieved from Datastream in order to examine this relation. Our findings point to the fact that market power significantly decreases a firm’s debt ratio. Although this study finds evidence for the negative relation between market power and debt ratio, this relation cannot fully be explained by a decreased stock return volatility and an increased stock market liquidity. Moreover, the negative relation is not due to an increased use of trade credit. ER -