Capital structure and product market behavior: an examination of plant exit and investment decisions.

We examine whether sharp debt increases through leveraged buyoutsand recapitalizations interact with market structure to influenceplant closing and investment decisions of recapitalizing firmsand their rivals. We take into account the fact that recapitalizationsand investment decisions are both endogenous and may be simultaneouslyinfluenced by the same exogenous events. Following their recapitalizations,firms in industries with high concentration are more likelyto close plants and less likely to invest. Rival firms are lesslikely to close plants and more likely to invest when the marketshare of leveraged firms is higher.