What a Relief: How do Firms Respond to Competitors’ Listing Delays?

61 Pages Posted: 5 Mar 2020 Last revised: 30 Mar 2021

See all articles by Ning Jia

Ning Jia

Tsinghua University - School of Economics & Management

Jiaqi Qian

Tsinghua University, PBC School of Finance, Students

Xuan Tian

Tsinghua University - PBC School of Finance

Date Written: March 30, 2021

Abstract

We examine how existing public firms (“incumbent firms”) respond to the listing delays of their product market competitors. Using regulation-induced initial public offering (IPO) suspensions in China that expose firms already approved for an IPO to indeterminate listing delays, we show that incumbent firms reduce costly defensive moves in response to declining expectation of an imminent threat by tightening their working capital policy and reducing aggressive acquisition activities. The effects are stronger for incumbent firms that are subject to larger competitive pressure from other public rivals, face severer ex ante threats from the suspended rival firm, and are more financially constrained. Additional analyses show that incumbent firms disclose less competition related information after competitors’ IPO delays, and reductions in costly defensive moves lead to better overall financial performance. Our paper sheds new light on the IPO peer effect, especially on how incumbent firms dynamically and proactively respond to the product market competitor’s capital market entry.

Keywords: Product market competition; initial public offerings; defensive moves; working capital management; M&A

Suggested Citation

Jia, Ning and Qian, Jiaqi and Tian, Xuan, What a Relief: How do Firms Respond to Competitors’ Listing Delays? (March 30, 2021). PBCSF-NIFR Research Paper, Available at SSRN: https://ssrn.com/abstract=3534884 or http://dx.doi.org/10.2139/ssrn.3534884

Ning Jia

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Jiaqi Qian (Contact Author)

Tsinghua University, PBC School of Finance, Students ( email )

No. 43, Chengdu Road
Beijing 100083
China

Xuan Tian

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

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