Abstract

http://ssrn.com/abstract=1569639
 
 

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The Indirect Effects of Changes in Product Market Competition


Mary J. Becker


University of Pittsburgh - Katz Graduate School of Business

Shawn E. Thomas


University of Pittsburgh - Finance Group

March 10, 2010


Abstract:     
We investigate the timing, magnitude, and direction of the relation between changes in product market competition across vertically related industries over the period 1978-2008. We document that changes in customer industry concentration are positively related to subsequent changes in supplier industry concentration consistent with changes in customer industry concentration prompting changes in supplier industry concentration. We find evidence that increased concentration in customer and supplier industries, perhaps reflecting countervailing power motives for horizontal mergers and acquisitions, explain in part the observed positive relation; however, we also find robust evidence that decreases in concentration perhaps reflecting entry waves in vertically related industries are also important determinants of the observed relation. Our results have implications for those papers that examine the association between the level of product market competition and important corporate finance policy choices and asset pricing.

Number of Pages in PDF File: 61

Keywords: Product Markets, Countervailing Power, Merger Waves, IPO Wave

JEL Classification: G34, L22

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Date posted: March 15, 2010  

Suggested Citation

Becker, Mary J. and Thomas, Shawn E., The Indirect Effects of Changes in Product Market Competition (March 10, 2010). Available at SSRN: http://ssrn.com/abstract=1569639 or http://dx.doi.org/10.2139/ssrn.1569639

Contact Information

Mary J. Becker
University of Pittsburgh - Katz Graduate School of Business ( email )
Pittsburgh, PA 15260
United States
Shawn E. Thomas (Contact Author)
University of Pittsburgh - Finance Group ( email )
372 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1648 (Phone)
412-648-1693 (Fax)
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