Details
| Original language | English |
|---|---|
| Pages (from-to) | 233-266 |
| Number of pages | 34 |
| Journal | Financial Management |
| Volume | 53 |
| Issue number | 2 |
| Publication status | Published - 7 May 2024 |
Abstract
We examine the impact of product market competition on firms' systematic risk. Using a measure of total product market similarity, we document a strong negative relationship between market power and market betas. The effect more than triples in the most recent period of low competition. Anticompetitive mergers result in a significant reduction in market betas. Firms facing less competition seem to be partially insulated from systematic discount-rate shocks. Lower equity costs therefore imply that market power is partly self-perpetuating.
Keywords
- discount-rate beta, market beta, market power, mergers and acquisitions, product market competition, systematic risk
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
- Business, Management and Accounting(all)
- Accounting
- Economics, Econometrics and Finance(all)
- Finance
Cite this
- Standard
- Harvard
- Apa
- Vancouver
- BibTeX
- RIS
In: Financial Management, Vol. 53, No. 2, 07.05.2024, p. 233-266.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Market power and systematic risk
AU - Hollstein, Fabian
AU - Prokopczuk, Marcel
AU - Würsig, Christoph Matthias
N1 - ACKNOWLEDGMENTS We would like to thank Kathleen Kahle (the editor), ananonymous referee, Maik Dierkes, Andreas Knetsch (discussant), as well as seminar participants at the 2022 Annual Meeting of the German Finance Association, TU Munich, and Leibniz University Hannover for helpful comments and suggestions. Open access funding enabled and organized by Projekt DEAL.
PY - 2024/5/7
Y1 - 2024/5/7
N2 - We examine the impact of product market competition on firms' systematic risk. Using a measure of total product market similarity, we document a strong negative relationship between market power and market betas. The effect more than triples in the most recent period of low competition. Anticompetitive mergers result in a significant reduction in market betas. Firms facing less competition seem to be partially insulated from systematic discount-rate shocks. Lower equity costs therefore imply that market power is partly self-perpetuating.
AB - We examine the impact of product market competition on firms' systematic risk. Using a measure of total product market similarity, we document a strong negative relationship between market power and market betas. The effect more than triples in the most recent period of low competition. Anticompetitive mergers result in a significant reduction in market betas. Firms facing less competition seem to be partially insulated from systematic discount-rate shocks. Lower equity costs therefore imply that market power is partly self-perpetuating.
KW - discount-rate beta
KW - market beta
KW - market power
KW - mergers and acquisitions
KW - product market competition
KW - systematic risk
UR - http://www.scopus.com/inward/record.url?scp=85176949990&partnerID=8YFLogxK
U2 - 10.1111/fima.12438
DO - 10.1111/fima.12438
M3 - Article
VL - 53
SP - 233
EP - 266
JO - Financial Management
JF - Financial Management
SN - 0046-3892
IS - 2
ER -