Effect Of Product Market Competition Research Articles

Testing the impact of sustainable environmental regulations on firm performance with mediating effect of product market competition: empirical evidence from Turkey.

Environmental challenges are increasingly becoming global issues due to the negatively induced effect of carbon dioxide on the natural climate and the well-being of human beings. Industrialisation has intensified the energy demand which brought the surge in the consumption of conventional non-renewable energy resources, including fossil fuels. Despite the overwhelming evidence of negative effects of utilising conventional energy on the atmosphere, there has been a steady rise in industrial production which has encouraged firms to adopt technological innovation. In this sense, many countries have developed various strategies, frameworks and regulations to reduce industrial-driven environmental degradation. Environmental-friendly compliant production technology can be an important substitute model to improve economic development. This study examines the relationship between environmental regulation and firm performance with mediating the impact of product market competition in Turkey. The study uses multi-sectoral firm-level Turkish data covering from 2004 to 2020 which was analysed via numerous methods that control for endogeneity bias. The results of generalised method of moment indicate a strong positive effect of sustainable environmental regulation (SER) on firm performance (FP). Moreover, after mediating the effect of product market competition by decomposing the firms into low product market competition (LPMC) and high product market competition (HPMC), finding reveals a negative effect of SER on FP of LMPC whereas a positive impact was found in the HPMC firms. This finding shows that HPMC compels managers to form a differentiated profit maximisation strategy. In this sense, competition can play a dedicated role in enhancing firm performance in the context of government deliberate strategies and regulations for control of the industrial negative effect on the environment. The industrial sector needs to switch from conventional energy practices to sourcing green and renewable energy that would not jeopardise the environmental quality.

Multi-Factor-Market Contact: From Forbearance to Vengeance and Homogeneity

Multimarket contact is an important consideration in the analysis of firm competitive behavior. However, the role multi-factor-market contact—contact across multiple factor markets—plays in factor market rivalry has largely been overlooked. To explore the relationships among multi-factor-market contact, factor market competition, and firm competitive behavior, I combine arguments from the existing competitive dynamics and resource-based view literatures. To empirically capture these relationships net of the potentially confounding effects of product market competition, I test my hypotheses in the upstream oil and gas industry, where firms compete for scarce resources to produce commodities. Analyzing panel data that comprise over one million firm-month observations from 5,445 upstream oil and gas companies, I find evidence that multi-factor-market contact makes rivals act less intensely but also respond more aggressively. Further, factor market competition engenders action heterogeneity, but multi-factor-market contact weakens this effect toward homogeneity.

Product market competition, venture capital, and the success of entrepreneurial firms

We document a positive effect of product market competition (PMC) on venture capital (VC) staging. Employing large tariff rate reductions as an exogenous shock to PMC, we find that large tariff reductions lead to a greater likelihood of staged financing and a larger number of financing rounds. Cross-sectional analyses reveal that the effect is stronger for entrepreneurial firms that are younger, operate in high-tech and manufacturing industries, or receive investments from less reputable and inexperienced VCs. Our findings are consistent with the notion that by mitigating business uncertainty and survival risk, VC staging acts as a complement to PMC for enhancing entrepreneurial firms’ success.

Non-Financial Enterprise Financialization, Product Market Competition, and Total Factor Productivity of Enterprises

At present, two big challenges have struck China’s economic development: economic containment “from the real to the virtual” and accomplishment in the goal of high-quality economic development. Taking China’s A-share public manufacturing enterprises from 2007 to 2020 as samples, this paper empirically analyzes the relationships among product market competition, non-financial enterprise financialization, and total factor productivity of enterprises. It is found that non-financial enterprise financialization significantly lowers down the total factor productivity of enterprises, that is, the total factor productivity of enterprises will drop by 1.7% as the non-financial enterprise financialization rises by 1 SD every time. After external regulation effects of product market competition are further taken into account, the furious product market competition, on the whole, mitigates the negative influences of non-financial enterprise financialization on total factor productivity of enterprises by strengthening the role of non-financial enterprise financialization as a “reservoir” and abating the “crowding-out” effect. Therefore, competition promotion policies combined with funds moving “from the virtual to the real” could more effectively elevate the enterprise productivity.

Product market competition and a firm’s R&D investment: New evidence from Korea

This study aims to examine the effect of product market competition on a firm’s investments in research and development (R&D) and how this effect varies depending on the firm’s internal corporate governance. This study employs the regression method to analyze the association between product market competition and a firm’s R&D investment. Since product market competition works effectively as an external corporate governance mechanism that reduces agency problems and information asymmetry, this study hypothesizes that a competitive product market promotes R&D investments. Using 11,560 firm-year observations of Korean listed firms for 2001–2020, this study finds a positive association between product market competition and R&D investment. The result also shows this association is more pronounced for firms with weak internal corporate governance mechanisms. Furthermore, additional analysis shows that the effect of product market competition on a firm’s R&D investment is stronger for firms in the low-tech industry. This study provides new insights on the inconclusive association between product market competition and a firm’s R&D investment and practical implications that product market competition drives firms to invest in R&D. AcknowledgementsThis work was supported by the Gachon University research fund of 2021.(GCU-202103550001)

Institutional quality and dark side of product market competition: a cross-country study

PurposeThe authors examine the joint effect of the country-wide legal institutions and product market competition on stock crash risk in a large sample of international firms.Design/methodology/approachIn the study, the authors examine whether the country-level institutional factors affect product market competition's impact on stock crash risk. Specifically, the authors characterize country-wide institutional quality with individual governance indices developed in earlier studies and also adopt the worldwide board reforms as a proxy for the change in firms' governance environment.FindingsThe authors find that strong institutions mitigate the positive relationship between product market competition and stock crash risk in the international setting. In addition, the authors find that institutional quality moderates the effect of product market competition on stock crash risk via the information channel, i.e. although firms in competitive industries manage and report earnings more aggressively, strong institutions or board reforms, curtail managers' incentive to do so.Originality/valueThe authors’ findings lend support to the dark side of product market competition with a broader sample from 35 countries. In light of this, when earlier studies consider firms from competitive (concentrated) industries as having less (more) severe agency problems, future studies should consider the agency costs associated with product market competition for both the US firms and non-US firms. Furthermore, when it is debatable that regulators are self-interested, captured, uninformed and thus the regulations and institutions may not be fully effective as a result, this study demonstrates the effectiveness of institutions in ex ante mitigating agency conflicts associated with product market competition.

Product market competition and carbon disclosure: Evidence from China

Based on a sample of Chinese publicly listed firms in eight high energy-consuming industries from 2015 to 2019, this study investigates the relationship between the intensity of product market competition and carbon disclosure and explores the moderating effect of earnings pressure and environmental legitimacy pressure on this relationship. Using content analysis to construct an integrated measure of corporate carbon disclosure, we find that the intensity of product market competition is negatively associated with carbon disclosure. The negative relationship between the intensity of product market competition and carbon disclosure is more pronounced among firms facing fewer earnings pressures and greater environmental legitimacy pressures. The additional tests also show that the effect of product market competition on carbon disclosure is more pronounced among state-owned firms and large firms. Our results are robust to various robustness tests. This study extends the literature on carbon disclosure and has important implications for different stakeholders to promote corporate climate-related disclosure in China.

The effect of product market competition on the relationship between managerial ability and firm characteristics

The effect of product market competition on the relationship between managerial ability and firm characteristics

Import competition and vertical integration: Evidence from India

Recent theoretical contributions provide conflicting predictions about the effects of product market competition on firms’ organizational choices. This paper uses a rich firm-product-level panel data set of Indian manufacturing firms to analyze the relationship between import competition and vertical integration. Exploiting exogenous variation from changes in India’s trade policy, we find that foreign competition, induced by falling output tariffs, increases backward vertical integration by domestic firms. The effects are concentrated among firms with high productivity and in industries with relatively low initial levels of competition. In contrast, falling input tariffs seem to have countervailing effects on vertical integration incentives. We also provide evidence that vertical integration is associated with lower marginal costs and increasing markups at the firm-product level.

Get Pennies from many or get a Dollar from one? Multiple licensing in markets for technology

This paper extends the licensing decision model in prior studies and proposes a two-stage model that explains the effects of product market competition and patent protection on the number of licenses made between technology suppliers and buyers. Using novel survey data on Japanese firms' licensing activities between 2008 and 2010, our empirical investigation finds that more competitors in licensors' product markets lead to more licenses whereas more competitors in licensees' product markets lead to fewer licenses. Further, empirical results also show that patent protection elicits opposite effects in the two stages such that patented technologies are more likely to be licensed but to fewer licensees, compared with non-patented technologies. Finally, the effects of product market competition and patent appear to interact in their joint influence on the number of licenses. • A two-stage model explains the effects of competition and patent on number of licenses. • Competitions in upstream and downstream markets affect number of licenses differently. • Patent protection has opposite effects in the two stages of the licensing decision. • Patented technologies are more likely to be licensed but to fewer licensees.

Corporate Governance, Product Market Competition and Announcement Returns of Spinoff Firms

Our paper investigates the relationship between corporate governance (internal corporate governance mechanism) and announcement returns of spinoff firms, and examines whether such relationship can be explained by product market competition (external corporate governance mechanism). Using a sample of 269 completed spinoffs between 1983 and 2009, we find a nonlinear U-shaped relationship between corporate governance and the cumulative abnormal return around the announcement period. Moreover, we find that such a nonlinear relationship hinges on the level of competition in the market in which the spinoff firms operate. Specifically, we find that weak governance firms experience higher announcement period return only in highly competitive industries, while strong governance firms exhibit higher announcement period return, but only in moderately competitive industries. Our findings reconcile the mixed results in the literature regarding the relationship between corporate governance and firm value by examining the effect of product market competition on this relationship. Our results highlight the importance of product market competition as a moderator between corporate governance and the announcement period return of the spinoff firms.

The moderating effect of corporate governance to the relationship of corporate social responsibility and product market competition to company value

The objective of this research is to find out the moderating effect of corporate governance on the relationship of corporate social responsibility and product market competition to company value. The control variable in this study is company size. The sample of this study was 216 observations consisting of 54 manufacturing companies listed in the Indonesia Stock Exchange from 2016 until 2019. Moreover, the simple random sampling method is employed to grab them. To analyze the data, we use the multiple regression model with polling data. The findings of this research are product market competition negatively affects company value. In opposition, corporate social responsibility and corporate governance positively affect company value. Meanwhile, corporate governance only moderates the effect of product market competition on the company value. The implication of this study is that good corporate governance practices can reduce the negative effects of PMC on company value.
 

When the Going Gets Tough, the Books Get Cooked:Product Market Competition and Financial Misconduct

This paper extends the research on financial misconduct by developing a new perspective based on general strain theory, and more specifically on the strain effect of product market competition. Previous literature suggests that product market competition can provide incentives for managers, but we argue that it can also lead to financial misconduct. In so doing, we take a strain perspective in making the argument that product market competition should be positively associated with the occurrence of misconduct, as it magnifies the threat arising from the possibility of firm liquidation and executive dismissal. We also examine the effect of internal governance mechanisms that are commonly deployed to minimize the agency problem. We argue that CEO option pay will negatively moderate the relationship between product market competition and the occurrence of financial misconduct, in line with the prevailing wisdom of corporate governance research. By contrast, while board independence has often been proposed as an effective governance mechanism to reduce the number of undesirable managerial behaviors, we argue it can exacerbate the threat of executive dismissal resulting from competition, creating incentives for fraudulent behavior. An empirical study of U.S. manufacturing firms provides broad support for our arguments.

Product Market Competition, Corporate Governance and ESG

This paper examines whether product market competition is associated with Environmental, Social, and Corporate Governance (ESG) and whether corporate governance moderates the effect of product market competition on ESG. Analysis involving 22,897 firm-year observations from 37 countries shows that companies with higher product competition have lower ESG and those with higher corporate governance have higher ESG. The results also indicate the moderating effect of corporate governance, as the negative relationship between product market competition and ESG diminishes for companies with higher corporate governance. The results remain robust in additional analysis using alternative measures for product market competition and corporate governance. The findings support the joint effect of product market competition and corporate governance in determining corporate performance in ESG. The findings reflect the various pressures influencing ESG practices, and on how the strength of corporate governance plays a vital role in ensuring strategic ESG being employed for the sustainable performance of companies. The findings have implications on companies that want to factor ESG into their plans especially to reinvent their companies for the period that follows the COVID-19 pandemic.

Industry cash flow volatility and stock price crash risk

This study examines the effect of industry cash flow volatility on the risks of stock price crash by investigating Chinese A‐share listed companies from 2005 to 2015. Findings reveal that increases in the degree of volatility in industry cash flow significantly increase the risk of a stock price crash, and the conclusion remains valid after the robustness test. Further empirical research reveals that a higher level of product market competition and a higher level of policy uncertainty increase the positive effect of industry cash flow volatility on stock price crash risks, which confirms the moderating effect of product market competition and policy uncertainty. The effect of reducing the degree of accounting conservatism and increasing the optimism of analysts' earnings forecasts is analyzed and revealed as interim steps in the mechanism of the effect of industry cash flow volatility on the company's stock price crash risk. Overall, this evidence highlights the severe consequence of industry cash flow volatility on crash risks, which should encourage researchers, investors, and regulators to address the management of industry cash flow volatility.

Analisa Pengaruh Kompetisi Pasar Produk, Ukuran Perusahaan, Leverage, Profitabilitas, Property, Plant And Equipment (PPE) dan Pertumbuhan Penjualan Terhadap Tax Avoidance Pada Perusahaan Manufaktur di Indonesia

This study aims to analyze the effect of product market competition, firm size, leverage, profitability, plant, property and equipment (PPE) and sales growth on tax avoidance. The object of this research is a manufacturing company listed on the Indonesia Stock Exchange in the period 2015 to 2019. The research method used is quantitative methods. The sample was determined based on the purposive sampling method. Overall, there were 134 companies to be sampled that met the criteria and passed the classic assumption test problems. The sources used are secondary data in the form of financial reports and annual reports obtained from the Indonesia Stock Exchange website (www.idx.co.id). The data processing program uses the Statistical Product and Service Solution (SPSS) version 25 program. The method of analysis used in this study is multiple linear regression. Based on the results of multiple linear analysis with a significance level of 5%, the results of this study conclude that the variables of product market competition, leverage, plant, property and equipment (PPE) and sales growth have no effect on tax avoidance, company size has a positive effect on tax avoidance, profitability has an effect. negative towards tax avoidance.

Corporate Governance and Cash Holding: New Insights from Concentrated and Competitive Industries

The present study empirically investigates the effect of corporate governance on the value of cash holding, usage of excess cash, and firm performance in concentrated and competitive industries in the context of less developed countries. The empirical analysis was conducted in the panel data setting using Pakistan as a case study. Our findings suggest a strong relationship between the value of cash holding and corporate governance, and the complementary effect of product market competition for corporate governance. This suggests that the external market discipline is also needed, in addition to good governance, to resolve agency problems in less developed countries. This is because less developed countries are usually characterized by lower competition, poor mechanisms for shareholder protection, and weak legal systems. Consequently, agency problems are greater in less developed countries compared to developed countries. Our findings also indicate that firms with good governance dissipate less excess cash on internal investment, dividends and diversification in competitive industries. Moreover, the significant positive relationship between the lagged excess cash and corporate governance dummy interaction with the dividend supports the dividend outcome model, particularly in the concentrated industries. Finally, our results suggest that the efficient utilization of excess cash, induced by good governance, leads to better corporate performance in less developed countries.

Product market competition, reputation, and dividend policy

ABSTRACT This paper examines the effect of product market competition on the dividend policy of firms. Previous studies report different relationships between product market competition and dividend payout policies. This paper aims to clarify the relationship between product market competition and dividend payout policies by dividing dividend-paying firms into two groups, high dividend firms and low dividend firms, based on the level of dividends. We hypothesize that when the product market is more competitive, high dividend firms pay more dividends, but low dividend firms pay less dividends. According to our test using all firms listed on the NYSE, AMEX, and NASDAQ stock exchanges from the CRSP, the results support our hypothesis. This paper also emphasizes the importance of the dividend reputation in the analysis of dividend-related matters. Firms with dividend reputation pay higher dividends than firms with no reputation.

CORPORATE BONDS AND PRODUCT MARKET COMPETITION

AbstractI examine the effect of product market competition on the yield spread of corporate bonds. I find that firms that face more competitive threats also face a higher cost of corporate bond debt. After controlling for common bond‐level, firm‐level, and macroeconomic variables, my results show that bondholders of firms that are subject to increased competition demand significantly higher credit spreads than holders of otherwise similar bonds. Furthermore, this effect is more pronounced for firms that have assets that are difficult to redeploy. Overall, my findings provide evidence that competitive threats are being reflected in corporate debt prices.

Intensity of product market competition, institutional environment and accrual quality

PurposeThis paper aims to investigate the joint effect of product market competition (PMC) and institutional environment on accrual quality.Design/methodology/approachThe sample covers a large data set of 52,138 firm-year observations from 35 countries over the period of 2011-2015. Using the weighted least square regression, the study estimates PMC and institutional environment on accrual quality. The study measures PMC based on Herfindahl-Hirschman index, anti-director rights index (ADRI) based on the revised and updated La Porta et al.'s (1998) and accrual quality using the modified Dechow and Dichev (2002) model proposed by McNichols (2002). The study also uses a series of specification tests using alternative measures for each variable.FindingsThe study finds that highly intensified PMC relates to a lower quality of accruals. The results also show that accrual quality is better in countries with stronger institutional environment, specifically countries with higher ADRI, investor protection, judicial independence, protection of minority shareholders’ interests, protection of property rights, strength of the auditing and reporting standards, efficacy of corporate boards and corporate ethics. The findings suggest that institutional factors weaken the negative impact of PMC intensity on accrual quality, hence suggesting that institutional environment has a significant role to enhance accrual quality among firms in highly intensified industries.Practical implicationsThe findings provide additional insights to policymakers and regulators on the importance of strong institutional and industry environment that can provide incentives and extra governance mechanisms besides the conventional firm-level corporate governance.Originality/valueThis study contributes in understanding the impact of intensity of PMC on accrual quality internationally and subsequently highlights the role of institutional environment as significant country-level governance in determining financial reporting quality, particularly accrual quality.