Product Market Threats, Payouts, and Financial Flexibility

2013/04/01 by GERARD HOBERG, Gerard Hoberg, GORDON PHILLIPS +3 · 4 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Corporate Finance and Governance #Auditing, Earnings Management, Governance #Financial Markets and Investment Strategies

paper · pdf · doi:10.1111/jofi.12050

Abstract

ABSTRACT We examine how product market threats influence firm payout policy and cash holdings. Using firms' product text descriptions, we develop new measures of competitive threats. Our primary measure, product market fluidity, captures changes in rival firms' products relative to the firm's products. We show that fluidity decreases firm propensity to make payouts via dividends or repurchases and increases the cash held by firms, especially for firms with less access to financial markets. These results are consistent with the hypothesis that firms' financial policies are significantly shaped by product market threats and dynamics.

Citations

• Are Dividend Changes a Sign of Firm Maturity?
• Giving Content to Investor Sentiment: The Role of Media in the Stock Market

Cited by

• Artificial intelligence, firm growth, and product innovation
• Do managerial incentives facilitate anti-competitive behavior? Evidence from collusion
• Uncertainty, precautionary saving, and investment: Evidence from prescheduled election cycles
• Too Uncertain to Lease? Economic Uncertainty and Corporate Leasing

Related

• Financial Strength and Product Market Behavior: The Real Effects of Corporate Cash Holdings
• Product Market Threats and Leases
• How Valuable Is Financial Flexibility when Revenue Stops? Evidence from the COVID-19 Crisis
• Product market competition and firm financial performance: The mediating role of capital structure and the moderating role of firm size
• Tarred with the Same Brush? Advertising Share of Voice and Stock Price Synchronicity