Global Journal of Management and Business Research, B: Economics and Commerce, Volume 22 Issue 4

oligopoly industries. Degryse, De Goeij & Kappert, (2012) demonstrated the existence of considerable heterogeneous intra-industry attributes, portraying evidence for the fact that the degree of industry rivalry, the extent of agency skirmishes, and the lack of homogeneity in the technology employed across industries are crucial determinants of the structure of capital in the industry. Bancel & Mittoo (2004) found that the financial policies of firms are shaped by both their international operations and the institutional environment. Kale & Shahrur (2007) found lesser levels of debt for firms functioning in industries characterized by predominant occurrences of joint ventures and strategic alliances with organizations in customer and supplier industries. They also found a favorable relationship between the firm level of debt and the extent of concentration in industries of customer and/or supplier in consistency with a negotiating attribute of debt. The capital structure of a firm has consequences for the firm’s investment decisions, product strategy, product innovation, organizational profitability, the value of the firm, and therefore, the overall attractiveness of the industry. Myers (1974) postulated that corporate financing and investment choices should be executed concurrently, for the reason that both decisions intermingle in significant ways. Brander and Lewis (1986) demonstrated that the capital structure of a firm might signal the credibility of its precommitment to impacting strategic interaction within an industry. O'brien (2003) proposed the necessity for organizations that seeks to develop a competitive strategy founded on innovation to maintain some level of financial slack, the absence of which might result in poor performance. Gill, Biger, & Mathur (2011) demonstrated that a favorable relationship exists between both short-term debts to total assets and total debt to total assets and profitability in the service industry. They also found a favorable relationship between short-term debt to total assets, long-term debt to total assets, and total debt to total assets and profitability in the manufacturing industry. Chevalier (1995) found that the announcement of leveraged buyouts (LBOs) of supermarkets elevated the firm market value of local rivals of the LBO chain and that supermarket chains have a greater propensity to make an entry and undertake expansions in a local market if a substantial proportion of the incumbent organization in the local market implemented leveraged buyouts. Abor (2005) found a substantially favorable relationship between the short ‐ term debt to total assets ratio and return on equity for firms listed on the Ghanaian Stock Exchange but, on the contrary, an unfavorable relationship between the long ‐ term debt to total assets ratio and return on equity and finally a significantly favorable relationship between the total debt to total assets ratio and returns on equity. Nasimi (2016) empirically analyzed the impact of capital structure and determined that an optimal level of capital structure, as well as effective application and allocation of available resources is fundamental to achieving the target level of productivity in business. Shubita & Alsawalhahn (2012) found substantially unfavorable relationship between debt and profitability for industrial companies listed on the Amman Stock Exchange in the course of a six-year time frame ranging from 2004 to 2009. Adeyemi & Oboh (2011) observed a significant positive relationship between the preferences for the capital structure of a firm and its market value within the ranks of publicly listed firms in Nigeria. b) The Power of Lenders Lenders are powerful and their tendency to portray this supremacy has various ramifications. Boot & Thakor (2011) demonstrated that since lenders will institute control rights over firms, firms have a preliminary management preference for financial securities that make the most of executive project- selection independence, suggesting the prevalence of lenders proclivity to exercise their power over firms through debt covenants that can restrict the executive capabilities of firm managers. The power of lenders is also exhibited in terms of the cost of debt capital provided or the amount of loan extended. Sengupta (1998) provides evidence that firms that receive high disclosure quality ratings from market or financial analysts have access to a lesser effective cost of raising debt capital. Broberg, Tagesson & Collin (2010) demonstrated that firms with superior disclosure practices have higher debt ratios. The power of lenders is also be reflected in the variability of the ease with which firms in various industries can raise debt capital. The airline industry is characterized by excessive debt load and a resultant excess capacity (Oum, Zhang & Zhang, 2000), signaling relatively more straightforward access to raising desired capital for capacity expansion. The real estate industry, including real estate investment trust companies (REITs) and property firms, have higher levels of debt capital because of their perceived lower level of operational risk in relation to other industries (Morri & Cristanziani, 2009). There are variabilities in the power and nature of lenders native to a specific industry. Large retailers can substantially rely on trade credits from suppliers (Liberman,2014), who, because of their relatively smaller size, have lower bargaining power. The financial industry, and specifically commercial banks, are uniquely blessed with the breadth and depth of lenders that are available at its disposal. As I have previously suggested, deposit providers or savers in commercial banks can be viewed as lenders to banks with a flexible or indeterminate maturity on their loans (savings). In addition, commercial banks can access loans from the central bank (acting as the lender of last resort) in the The Determinants of the Attractiveness of an Industry: An Extension of The Porter’s Five-Forces Framework 89 Global Journal of Management and Business Research Volume XXII Issue IV Version I Year 2022 ( ) B © 2022 Global Journals