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

63 Pages Posted: 5 Mar 2020

See all articles by Ning Jia

Ning Jia

Tsinghua University - School of Economics & Management

Jiaqi Qian

Tsinghua University - PBC School of Finance

Xuan Tian

Tsinghua University - PBC School of Finance

Date Written: February 9, 2020

Abstract

We examine how existing public firms (“incumbent firms”) respond to the listing delays of their competitors. Using regulation-induced initial public offering (IPO) suspensions in China that expose firms already approved for an IPO to indeterminate listing delays, we find that, in response to the declining expectation of imminent threat, incumbent firms reduce their defensive moves. Specifically, they reduce aggressive M&As activities, tighten working capital management to enhance operating efficiency, and engage in less aggressive management disclosure, which lead to an improvement in the overall financial performance. The main results are more pronounced for incumbent firms that encounter greater competitive pressure from other public rivals, face severer threat from the IPO competitor, and hold a dominant position in their industry. After IPO suspensions are over and competitors resume their listing process, incumbent firms appear to regain defensive stance only via aggressive disclosure, but do not change their investment and operating activities. Our paper sheds new light on the dynamic interactions among product market competitors.

Keywords: Dynamic Competition, Initial Public Offerings, Defensive Moves

Suggested Citation

Jia, Ning and Qian, Jiaqi and Tian, Xuan, What a Relief: How do Firms Respond to Competitors’ Listing Delays? (February 9, 2020). 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 ( email )

No. 43, Chengfu Road
Haidian District
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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