Investment and Competition

53 Pages Posted: 15 Oct 2006

See all articles by Evrim Akdoğu

Evrim Akdoğu

Sabanci University

Peter MacKay

Hong Kong University of Science & Technology (HKUST) - Department of Finance


This paper examines how industry structure affects corporate investment patterns. Real-options theory shows that deferring irreversible investment in the face of uncertainty is valuable. Theory also shows that the value of waiting to invest falls if investment opportunities are contestable. Consistent with these theories, we find that firms in monopolistic industries exhibit lower investment-q sensitivity and are slower to invest than firms in competitive industries. However, we find that investment-q sensitivity and investment speed are highest in oligopolistic industries, suggesting that the value of investing strategically can outweigh the value of waiting. Indeed, oligopolistic industries experience less entry and more exit than other industries.

Keywords: corporate investment, industry structure, competition, real options

Suggested Citation

Akdoğu, Evrim and Mackay, Peter, Investment and Competition. Journal of Financial and Quantitative Analysis, Forthcoming, Available at SSRN:

Evrim Akdoğu (Contact Author)

Sabanci University ( email )


Peter Mackay

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong
852-2358-8319 (Phone)
852-2358-1749 (Fax)


Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics