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Competition and Operating Volatilities around the World

50 Pages Posted: 17 Apr 2013 Last revised: 12 May 2017

Tanakorn Makaew

Securities and Exchange Commission (SEC)

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Date Written: May 11, 2017

Abstract

Numerous papers have shown that developing economies are more volatile. This paper shows despite greater aggregate and industry stability, performance and size of individual firms in developed countries are more volatile. In developing countries, market imperfections insulate incumbent firms from competition. Consistent with this, firms in developing countries have higher profit, market concentration, and survival rate. Cross-country differences in operating risk and competition intensity are greater in external finance dependent industries where we expect higher impacts of capital market imperfections. We show that the inverse relation between aggregate and firm-level volatilities has important implications on international studies of cash holding.

Keywords: Firm Risk, Volatility, Competition, Financial Development, Cash Holding

JEL Classification: G15, G31, G32, F44

Suggested Citation

Makaew, Tanakorn and Maksimovic, Vojislav, Competition and Operating Volatilities around the World (May 11, 2017). Available at SSRN: https://ssrn.com/abstract=2251422 or http://dx.doi.org/10.2139/ssrn.2251422

Tanakorn Makaew (Contact Author)

Securities and Exchange Commission (SEC) ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/vmax/

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