Competition and Operating Volatilities around the World
50 Pages Posted: 17 Apr 2013 Last revised: 12 May 2017
Date Written: May 11, 2017
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: Suggested Citation