Manufacturer's Optimal Marketing Decisions under Debt Financing When Lenders Can Trade Financial Derivatives

摘要

This paper examines how debt financing and the trading of a special financial derivative called credit default swaps (CDS) may respectively impact a manufacturer's product-line design, advertising, pricing, and stock-out decisions. Despite that most firms in the real world are financially leveraged and seek to maximize equity value, the existing marketing theory has mostly assumed profit-maximizing firms. The 2008 financial crisis indicates that debt financing can impact literally each and every firm facing demand or cost uncertainty, and a marketing theory that overlooks the effects of financial leverage on firm behavior and industry equilibrium can be seriously biased and flawed.