The Impact of Product Market Competition on the Quantity and Quality of Management Profits and Investment Forecasts

2009 ◽  
Author(s):  
Xi Li
Keyword(s):  
Market Competition ◽  
Product Market ◽  
Product Market Competition ◽  
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.

Modeling product market competition and reporting quality: the transitional economy of China

2017 ◽  
Vol 43 (2) ◽  
pp. 154-166 ◽  
Author(s):  
Amjad Iqbal ◽  
Zia-ur-Rehman Rao ◽  
Muhammad Zubair Tauni ◽  
Khalil Jebran
Keyword(s):  
Market Competition ◽  
Reporting Quality ◽  
Product Market ◽  
Transitional Economy ◽  
Product Market Competition ◽  
Absolute Level ◽  
Content Type ◽  
The Absolute

Purpose The purpose of this paper is to examine the role of product market competition in shaping a firm’s reporting quality (RQ). Design/methodology/approach This research uses an aggregate measure of a firm’s RQ, considering both the absolute level of discretionary accruals (DA) and the quality of accruals, using modified Jones model and Francis et al. (2005) accruals quality model, respectively. Whereas, the Herfindahl-Hirschman index and the Lerner index are used to measure product market competition. Further, this study considers the transitional economy of China and employs panel data estimation techniques for testing the hypothesized relationships. Findings This study finds that firms operating in more competitive industries are associated with higher RQ. This association still prevails when analysis is done using the component measures of RQ (i.e. the absolute level of DA and the quality of accruals). Overall, the empirical results provide evidence on the disciplining role of product market competition among Chinese firms. Practical implications Given the complex governance structures and specific kind of agency problems in Chinese corporations, this study suggests that product market competition may play an external disciplining role to improve the corporate information environment. Originality/value This research explores the role of product market competition for a firm’s RQ in Chinese-listed companies, while the prior studies on the same topic are mostly from the developed countries.

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.

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