scholarly journals Product Market Competition and the Impact of Price Uncertainty on Investment : Some Evidence From U.S. Manufacturing Industries

1995 ◽  
Vol 1995 (517) ◽  
pp. 1-19 ◽  
Author(s):  
Vivek Ghosal ◽  
◽  
Prakash Loungani
Keyword(s):  
Market Competition ◽  
Product Market ◽  
Manufacturing Industries ◽  
Product Market Competition ◽  
Price Uncertainty ◽  
The Impact

Agency problems and the value of advertising expenditures in an emerging market: role of product market competition

2020 ◽  
Vol 46 (9) ◽  
pp. 1123-1143
Author(s):  
Omar Farooq ◽  
Zakir Pashayev
Keyword(s):  
Positive Impact ◽  
Emerging Market ◽  
Market Competition ◽  
Agency Problems ◽  
Product Market ◽  
Product Market Competition ◽  
Content Type ◽  
Financial Firms ◽  
The Impact

PurposeThis paper documents the impact of product market competition on the value of advertising expenditures.Design/methodology/approachThe authors use the data for non-financial firms from India and the pooled regression procedure to test their arguments during the period between 2009 and 2018.FindingsThe results show that advertising expenditures of firms operating in sectors with relatively high competition are more valuable than advertising expenditures of firms operating in sectors with relatively low competition. The results of the study are robust across various proxies of advertising expenditures and firm performance. Furthermore, the results also show that the positive impact of product market competition on the value of advertising expenditures is confined only to firms that already have lower agency problems.Originality/valueThe results of the study highlight the importance of product market competition on the value of advertising expenditure in the emerging market setting, where agency problems are supposed to be high.

Product market competition, cash flow and corporate investments

2018 ◽  
Vol 44 (2) ◽  
pp. 207-221 ◽  
Author(s):  
Hussein Ali Ahmad Abdoh ◽  
Oscar Varela
Keyword(s):  
Cash Flow ◽  
Market Competition ◽  
Product Market ◽  
Product Market Competition ◽  
Content Type ◽  
Growth Firms ◽  
Capital Spending ◽  
The Difference ◽  
The Impact

Purpose The purpose of this paper is to examine the effects of product market competition on capital spending (investments) financed by cash flow (CF), and the role of financial constraints (FC) on these effects. Design/methodology/approach The Herfindahl-Hirschman index of concentration measures competition. Earnings retention, working capital, the Kaplan and Zingales (1997) index and CF shortfalls measure FC. Regressions relating capital spending to competition are performed for the full sample, as well as financially constrained and unconstrained, and growth and value firms’ sub-samples. For robustness, large reductions in import tariffs are examined to exogenously measure competition, with the impact of these on capital spending tested via the difference-in-difference method. Findings The results show that competition fosters valuable investments when firms are financially unconstrained, especially for growth firms, and reduces these investments when they are financially constrained, especially for value firms. Practical implications The role of policy makers in alleviating FC should be focused toward growth firms that operate in competitive industries. As well, increasing financial pressure on value firms in competitive industries can have desirable effects, as it forces these firms to reduce investment inefficiency. Originality/value Many firm-specific and environmental factors drive the relation between competition and investment. Khanna and Tice (2000) find profitable firms increasing and highly levered firms decreasing investments in response to Wal-Mart’s entry into their markets. Jiang et al. (2015) suggest that environments with predictable growth drive a positive relation between competition and investments. This study claims that another factor that affects this relation is the firm’s level of FC.

The impact of product market competition on stock price crash risk

2020 ◽  
Vol 35 (7) ◽  
pp. 1141-1153
Author(s):  
Jia Li ◽  
Zhengying Luo
Keyword(s):  
Stock Price ◽  
Market Competition ◽  
Product Market ◽  
Listed Companies ◽  
Product Market Competition ◽  
Crash Risk ◽  
Competitive Position ◽  
Content Type ◽  
Industry Competition ◽  
The Impact

Purpose The purpose of this paper is to explore the impact of product market competition on the risk of stock price crash based on the degree of industry competition and the competitive position of enterprises. Design/methodology/approach This paper chooses the data of Shanghai and Shenzhen A-share listed companies from 2009 to 2017 as samples and uses a threshold regression model to explore the impact of product market competition on the risk of a stock price crash. Findings The results show that: the overall level of industry competition is negatively correlated with the risk of stock price crash; the competitive position of enterprises and the risk of a stock price crash. The correlation is not significant: for high competitive enterprises, the degree of industry competition is negatively correlated with the risk of stock price crash; for low competitive enterprises, the degree of industry competition is positively correlated with the risk of a stock price crash and the conclusions obtained have passed the robustness test. Originality/value This paper not only enriches the literature on the relationship between product market competition and the risk of stock price crash but also has reference significance for supervisors to allocate resources to supervise information disclosure of listed companies.

Product market competition, oil uncertainty and corporate investment

2020 ◽  
Vol 16 (5) ◽  
pp. 645-671
Author(s):  
Hussein Abdoh ◽  
Aktham Maghyereh
Keyword(s):  
Market Competition ◽  
Product Market ◽  
Corporate Investment ◽  
Oil Price ◽  
Product Market Competition ◽  
Price Uncertainty ◽  
Irreversible Investment ◽  
Content Type ◽  
Short Period ◽  
Lagged Dependent Variable

PurposeThe purpose of this study is to examine the effect of product market competition on the oil uncertainty–investment relation.Design/methodology/approachThe authors use firm-level financial data from the COMPUSTAT database, competition proxies from Hoberg and Phillips (2016) and macroeconomic data on crude oil price uncertainty. Corporate investment is measured as capital expenditure scaled by total assets or as the annual change in (net) total fixed assets plus depreciation. Since our panel data covers a short period (22 years) and the regressions include a combination of a lagged dependent variable and firm fixed effects, the authors apply Blundell and Bond’s (1998) GMM system when regressing corporate investment on the interaction between oil uncertainty and competition.FindingsConsistent with the theories in the irreversible investment literature, the authors first show that investments are negatively related to oil uncertainty. Second, they show that firms in competitive industries decrease their investments in response to heightened uncertainty by a higher degree than firms in concentrated industries, suggesting that competition can exacerbate negative investment outcomes when success is uncertain. The authors also examine how competition relates to investment asymmetric reactions to positive and negative oil price return volatilities and find a stronger negative relationships between competition and investment-positive oil price volatility, indicating that increasing the probability of a negative outcome due to uncertainty leads firms to reduce investment to a larger extent.Practical implicationsThe findings provide useful insights to guide corporate investment decisions under oil price change uncertainty. In particular, if firms can wait for the resolution of uncertainty before deciding to pursue irreversible investment in a competitive market, they can avoid potentially large losses by foregoing investment when the outcomes are unfavorable. This is because competition brings a greater uncertainty to firm performance if the investment outcome is poor, as firms in competitive industries share a large proportion of industry-wide profits with rivals and, thus, competition could erode profit margins and increases the likelihood of being driven out of the market. Hence, firms in competitive markets should balance between strategic preemptive motives and waiting for the resolution of uncertainty before deciding to pursue investment.Originality/valueThis study is the first to examine the effect of competition on the relationship between investment and oil price uncertainty. Moreover, it is the first to examine the effect of competition on the asymmetric response of investment to oil price uncertainty emanating from positive and negative changes in oil price.

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