Abstract
Building on dynamic collusion theories, we predict that firms with less concentrated upstream or downstream industries have lower systematic risk because their supply chain partners tend to compete more aggressively during recessions, absorbing more of the adverse effect of aggregate shocks. Consistent with this prediction, we find that these firms experience a smaller decrease in fundamental performance during recessions, have significantly lower fundamental and capital market risks, and enjoy a significantly lower cost of equity capital. The overall results highlight the importance of vertical competition in determining a firm’s systematic risk and cost of equity capital.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
