Competition laws, external financing and investment

51 Pages Posted: 11 Dec 2022 Last revised: 23 Jan 2024

See all articles by James Xede

James Xede

Hong Kong Metropolitan University

Cephas Simon Peter Dak-Adzaklo

University of Sussex; City University of Hong Kong (CityU), Department of Accountancy, Students

Emmanuel Ofosu

City University of Hong Kong (CityU) - Department of Accountancy

Solomon W.D. Adza

Hong Kong Polytechnic University

Date Written: October 10, 2022

Abstract

We examine the effect of competition laws on external financing and investment decisions around the world. Using a large sample of 21,801 firms across 32 countries, we find a positive association between the stringency of competition laws, and external financing and investment. Our finding is robust to several sensitivity tests, including using alternative measures of external financing and investment, alternative samples and a first-difference change analysis. In cross-sectional analyses, we find that the positive association between the stringency of competition laws and external financing and investment is stronger for financially constrained firms, poorly governed firms, and firms in countries with poorer investor protection and weaker legal enforcement. Collectively, our results support the governance role of intensifying market competition in influencing external financing and investment. Using a sample that covers diverse industries and many countries, our study improves our understanding of the effects of market competition, particularly how variation in institutional settings matters for the success of competition laws and should be of value to policymakers.

Keywords: Competition Laws, Corporate Governance, External Financing, Investment

JEL Classification: G15, G30, K21, L4

Suggested Citation

Xede, James and Dak-Adzaklo, Cephas Simon Peter and Ofosu, Emmanuel and Adza, Solomon W.D., Competition laws, external financing and investment (October 10, 2022). Journal of International Financial Markets, Institutions and Money, 2023, Available at SSRN: https://ssrn.com/abstract=4287292

James Xede

Hong Kong Metropolitan University ( email )

Lee Shau Kee School of Business and Administration
B & A
Hong Kong
Hong Kong

Cephas Simon Peter Dak-Adzaklo (Contact Author)

University of Sussex ( email )

Sussex House
Falmer
Brighton, Sussex BNI 9RH
United Kingdom

City University of Hong Kong (CityU), Department of Accountancy, Students ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Emmanuel Ofosu

City University of Hong Kong (CityU) - Department of Accountancy ( email )

Hong Kong
China

HOME PAGE: http://sites.google.com/view/eofosu

Solomon W.D. Adza

Hong Kong Polytechnic University ( email )

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