How Does Corporate Investment Respond to Increased Entry Threat?

Frésard, Laurent; Valta, Philip (2016). How Does Corporate Investment Respond to Increased Entry Threat? Review of Corporate Finance Studies, 5(1), pp. 1-35. Oxford University Press 10.1093/rcfs/cfv015

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We study how product-market interactions affect investment. We use reductions of import tariffs to examine how incumbents modify investment when the threat of rivals’ entry intensifies. Incumbents reduce investment by 7.2% in response to higher entry threat. Consistent with a strategic behavior, the investment reduction varies across market structures: it concentrates in markets in which competitive actions are strategic substitutes, where deterring entry is costly and investment makes incumbents look soft. Our results provide novel evidence on how and why firms’ interactions influence corporate investment.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute of Financial Management

UniBE Contributor:

Valta, Philip

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

2046-9136

Publisher:

Oxford University Press

Language:

English

Submitter:

Karin Dolder

Date Deposited:

17 Aug 2016 16:00

Last Modified:

01 Jan 2018 02:30

Publisher DOI:

10.1093/rcfs/cfv015

BORIS DOI:

10.7892/boris.85662

URI:

https://boris.unibe.ch/id/eprint/85662

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