The Indirect Effects of Changes in Product Market Competition

61 Pages Posted: 15 Mar 2010  

Mary J. Becker

University of Pittsburgh - Katz Graduate School of Business

Shawn Thomas

University of Pittsburgh - Katz Graduate School of Business

Date Written: 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.

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

JEL Classification: G34, L22

Suggested Citation

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

Mary J. Becker

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States

Shawn Thomas (Contact Author)

University of Pittsburgh - Katz Graduate School of Business ( email )

246 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1648 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~shthomas/index.htm

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