TY - JOUR
T1 - Investment efficiency and product market competition
AU - Stoughton, Neal M.
AU - Wong, Kit Pong
AU - Yi, Long
N1 - Funding Information:
*Stoughton (corresponding author), [email protected], WU (Vienna University of Economics and Business) Department of Finance, Accounting and Statistics; Wong, [email protected], University of Hong Kong School of Economics and Finance; Yi, [email protected], Hong Kong Baptist University Department of Finance and Decision Sciences. This paper was presented at the 2013 Financial Management Association meeting, Fudan University, National Chengchi University, the University of Copenhagen, the Vienna University of Economics and Business, the 2015 China International Conference in Finance, the 2015 Belarusian Economic Research and Outreach Center conference, and the 2016 Finance Down Under conference. We thank discussants Dalida Kadyrzhanova, Sandy Klasa, Bryan Lim, and Dong Yan for very helpful discussions as well as for providing the Census HHI data. We also thank Paul Malatesta (the editor) and Gordon Phillips (the referee) for their useful comments and suggestions.
PY - 2017/12/1
Y1 - 2017/12/1
N2 - Does more competition lead to more information production and greater investment efficiency? This question is largely unexplored in the finance literature. This article provides both a model and a series of extensive empirical tests. The model features a 2-stage Bayesian game in differentiated products market competition. We find that competition causes firms to acquire less information and investments to become more inefficient relative to a first-best case with the same market structure. Empirically, the panel regression analysis provides strong support for the theory and shows that investment is more efficient in concentrated industries.
AB - Does more competition lead to more information production and greater investment efficiency? This question is largely unexplored in the finance literature. This article provides both a model and a series of extensive empirical tests. The model features a 2-stage Bayesian game in differentiated products market competition. We find that competition causes firms to acquire less information and investments to become more inefficient relative to a first-best case with the same market structure. Empirically, the panel regression analysis provides strong support for the theory and shows that investment is more efficient in concentrated industries.
UR - http://www.scopus.com/inward/record.url?scp=85039993423&partnerID=8YFLogxK
U2 - 10.1017/S0022109017000746
DO - 10.1017/S0022109017000746
M3 - Journal article
AN - SCOPUS:85039993423
SN - 0022-1090
VL - 52
SP - 2611
EP - 2642
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 6
ER -