Essays on Product Market Competition and Managerial Incentives in Oligopoly Firms PDF Download

Author: Ismo Linnosmaa
Publisher:
ISBN: 9789517819312
Category : Competition
Languages : en
Pages : 198

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Tiivistelmä: Tuotemarkkinoiden kilpailu ja yritysjohdon kannustinjärjestelmät epätäydellisen kilpailun yrityksissä.

Author: Stefan Beiner
Publisher:
ISBN:
Category :
Languages : en
Pages : 53

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This paper contributes to the very small empirical literature on the effects of competition on managerial incentive schemes. Based on a theoretical model that incorporates both strategic interaction between firms and a principal agent relationship, we analyze the relationship between product market competition, incentive schemes and firm valuation. The model predicts a nonlinear relationship between the intensity of product market competition and the strength of managerial incentives. We test the implications of our model empirically based on a unique and hand-collected dataset comprising over 600 observations on 200 Swiss firms over the 2002 to 2005 period. Our results suggest that, consistent with the implications of our model, the relation between product market competition and managerial intensive schemes is convex indicating that above a certain level of intensity in product market competition, the marginal effect of competition on the strength of the incentive schemes increases in the level of competition. Moreover, competition is associated with lower firm values. These results are robust to accounting for a potential endogeneity of managerial incentives and firm value in a simultaneous equations framework.

Author: Guifeng Shi
Publisher:
ISBN:
Category :
Languages : en
Pages : 47

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In this paper, we employ a firm-level measure of product market competition constructed from the textual analysis of firms' 10-K filings and examine the relationship between managerial perceived competition pressure and firms' earnings management. We find that misstatement is positively related to product market competition, which is consistent with the notion that competition pressure increases managerial incentives to manage earnings. We also find that real earnings management is negatively related to product market competition. This suggests that real earnings management involves actions that decrease firms' competitiveness and is costly for firms under high competition pressure.

Author: Shyh-Fang Ueng
Publisher:
ISBN:
Category : Competition
Languages : en
Pages : 118

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This research investigates three issues related to the economic performance of oligopolistic markets where firms produce differentiated products and compete in prices. First of all, this dissertation uses a Markov Perfect Equilibrium approach with fixed periods of commitment of actions to answer the question of what prices a duopolists will charge in equilibrium if they produce horizontally differentiated products, move alternatingly, and compete in prices forever. It is found that firms charge prices which are higher than Nash equilibrium prices but lower than the fully collusive equilibrium prices. Also, contrasted with the Nash equilibrium of the one-shot constituent game, the firm having the significantly higher demand responsiveness to its own price always charges a lower price than the other firm does although it has higher marginal cost. The dissertation then proceeds to study whether a firm can overcome its cost disadvantage by upgrading its product over the rival's, and if so, whether there exists a profit-division which will induce the low cost firm and the high cost firm to collude and no one has an incentive to cheat. The results show that (1) the ability of upgrading the product over the rival's can allow a high cost firm to earn higher profit than a cost advantaged low cost firm; (2) there exists at least one profit-division which can sustain full collusion; and (3) in the collusive equilibrium firms enlarge their quality differences to alleviate the price tension between their products. Finally, this work investigates the welfare effect of mergers which occur in an oligopolistic industry where firms produce differentiated products. It is shown that for the merger to be socially beneficial, the number of the merging firms must be less than the total number of firms in the industry minus the ratio of the products' own elasticity to cross elasticity. The analysis indicates that the welfare effect of a merger of a specific size depends on the substitutability among products of the industry.

Author: Long Yi
Publisher:
ISBN: 9781361355572
Category :
Languages : en
Pages :

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This dissertation, "Product Market Competition and Investment Efficiency" by Long, Yi, 易龍, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: This thesis consists of two essays on the impacts product market competition has on the real investment efficiency of firms. While the first essay looks at this question through the corporate governance angle and finds product market competition complements institutional investors in disciplining firms, the latter one studies the impacts from an information production point of view and concludes competition reduces the incentive of firms to acquire information thereby reduces investment efficiency. Using product market competition as a proxy for external corporate governance, the first essay documents a sizeable difference between the governance impact of institutional investors on firms with strong and weak external corporate governance. Higher institutional ownership is associated with real efficiency of firms, but only when external corporate governance is strong. The real efficiency is reflected in higher investment sensitivity to investment opportunities and higher firm value. Utilizing the passing of business combination laws as a negative shock to external corporate governance, the essay identifies that firms with higher institutional ownership suffer a larger decrease in real efficiency, suggesting external corporate governance such as product market competition is critical for institutional investors in disciplining firms. The second essay attempts to figure out the impact of product market competition from an ex ante point of view. Specifically, how does product market competition change the incentive of firms to acquire information about investment opportunities ex ante? The essay provides both a model and a series of extensive empirical tests. The model features a two-stage Bayesian game in differentiated products market competition. This essay finds that competition causes firms to acquire less information and that investment becomes more inefficient in competitive industries. Empirically investment efficiency is measured by a latent variable technique and related to competition using a Herfindahl-Hirschman index as well as more exogenous measure such as trade costs. The panel regression analysis provides strong support for the theory and shows that investment is more efficient in concentrated industries. DOI: 10.5353/th_b5270556 Subjects: Capital investments Competition Corporate governance

Author: Lixiong Guo
Publisher:
ISBN:
Category : Chief executive officers
Languages : en
Pages : 203

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Author:
Publisher:
ISBN:
Category : Dissertations, Academic
Languages : en
Pages : 640

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Author: Rafael Moner Colonques
Publisher:
ISBN:
Category : Commercial policy
Languages : en
Pages : 136

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Author: Mark Bagnoli
Publisher:
ISBN:
Category :
Languages : en
Pages : 27

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We examine how biased financial reports (managed earnings) affect how firms compete in the product market and how product market competition affects incentives to bias reported earnings. We find that Cournot competitors bias their financial reports so as to create the impression that their costs of production are lower than they actually are. This bias leads to lower total production, a higher price and each competitor earning greater product market profits. These results obtain even though no firm is fooled by its rival's disclosure. We also find that the magnitude of the bias (the amount of earnings management) is larger when firms compete in more profitable product markets but smaller when they can extract more information about their rival's costs from their own. When the costs of misreporting are asymmetric, the lower cost firm engages in more earnings management than its rival, and it produces more and earns greater profits than it would in a full-information environment. Our analysis also offers new, testable implications for the relationship between earnings management, reported and actual earnings and industry structure.

Author: Daniel F. Spulber
Publisher: Cambridge University Press
ISBN: 9780521659789
Category : Business & Economics
Languages : en
Pages : 412

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Professor Spulber demonstrates how the intermediation theory of the firm explains firm formation by showing why firms arise in a market equilibrium with costly transactions. In addition, the theory helps explain how markets work by.