Abstract
This paper proposes a theory of the anti-competitive effects of debt finance based on the interaction between capital structure, managerial incentives, and firms' ability to sustain collusive agreements. It shows that shareholders' commitments that reduce conflicts with debtholders - such as a manager with a valuable reputation or "conservative" managerial incentives - besides reducing the agency cost of debt finance also greatly facilitate tacit collusion in product markets. Collusive credit markets or large banking groups can ensure the credibility of such commitments, thereby "exporting" collusion through leverage in otherwise non-collusive product markets.