The impact of product warranties on the capital structure of Australian firms

Abstract

This paper examines the impact of Australian firms’ warranty policies on capital structure. The sample consists of 378 firms and 1727 firm-years for Australian public firms for the period 2006–2010. The results suggest that warranty policies impact on Australian firms’ capital structures. Firms offering product warranties to customers have less leverage than those firms that do not. Firms commit to honour warranty contracts, whether explicit or implicit, by selecting lower leverage levels.