Product Market Competition and Industry Returns

• 成果类型: Article
• 署名作者: Bustamante, M. Cecilia; Donangelo, Andres
• 署名单位: University System of Maryland; University of Maryland College Park; University of Texas System; University of Texas Austin
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhx033
• 发表日期: 2017
• 页码: 4216
• 关键词: EQUILIBRIUM INVESTMENT STRATEGIES; Operating leverage; financial leverage; SYSTEMATIC-RISK; wage rigidity; asset returns; cross-section; VALUE PREMIUM; real-options; STOCK

摘要

This paper studies how expected returns interact with product market competition. The model predicts that (1) competition erodes markups, such that firms are more exposed to systematic risk; (2) the threat of entry by new firms lowers exposure to systematic risk of incumbents; and (3) higher industry aggregate risk represents a barrier to entry, such that riskier industries become less competitive. We provide empirical evidence consistent with these three channels and for an overall negative relation between returns and competition. We also consider a sample selection correction for publicly listed firms and use it to construct an alternative concentration measure.