Capital Markets Constrain Industry Scale

47 Pages Posted: 8 Dec 2003

See all articles by Eslyn L. Jean-Baptiste

Eslyn L. Jean-Baptiste

Columbia Business School

Michael H. Riordan

Columbia University - Columbia Business School

Date Written: September 2003

Abstract

The paper considers an industry featuring agency problems between outside investors and entrepreneurs who manage the firms comprising the industry. In a range of circumstances, industry scale is independent of product market structure, and is determined solely by the amount of equity financing contributed by the entrepreneurs, and by the capital market's response to possible managerial malfeasance. Thus, in the face of capital market constraints, a change in product-market concentration has no effect on market performance unless it occasions a change in the amount of inside equity financing.

Suggested Citation

Jean-Baptiste, Eslyn L. and Riordan, Michael H., Capital Markets Constrain Industry Scale (September 2003). AFA 2004 San Diego Meetings. Available at SSRN: https://ssrn.com/abstract=471262 or http://dx.doi.org/10.2139/ssrn.471262

Eslyn L. Jean-Baptiste (Contact Author)

Columbia Business School ( email )

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HOME PAGE: http://www.columbia.edu/~ns38/

Michael H. Riordan

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States
212-854-6984 (Phone)

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