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postgraduate thesis: Product market competition and investment efficiency

TitleProduct market competition and investment efficiency
Authors
Advisors
Advisor(s):Wong, KP
Issue Date2014
PublisherThe University of Hong Kong (Pokfulam, Hong Kong)
Citation
Yi, L. [易龍]. (2014). Product market competition and investment efficiency. (Thesis). University of Hong Kong, Pokfulam, Hong Kong SAR. Retrieved from http://dx.doi.org/10.5353/th_b5270556
AbstractThis thesis consists of two essays on the impacts product market competition has on the real investment efficiency of firms. While the first essay looks at this question through the corporate governance angle and finds product market competition complements institutional investors in disciplining firms, the latter one studies the impacts from an information production point of view and concludes competition reduces the incentive of firms to acquire information thereby reduces investment efficiency. Using product market competition as a proxy for external corporate governance, the first essay documents a sizeable difference between the governance impact of institutional investors on firms with strong and weak external corporate governance. Higher institutional ownership is associated with real efficiency of firms, but only when external corporate governance is strong. The real efficiency is reflected in higher investment sensitivity to investment opportunities and higher firm value. Utilizing the passing of business combination laws as a negative shock to external corporate governance, the essay identifies that firms with higher institutional ownership suffer a larger decrease in real efficiency, suggesting external corporate governance such as product market competition is critical for institutional investors in disciplining firms. The second essay attempts to figure out the impact of product market competition from an ex ante point of view. Specifically, how does product market competition change the incentive of firms to acquire information about investment opportunities ex ante? The essay provides both a model and a series of extensive empirical tests. The model features a two-stage Bayesian game in differentiated products market competition. This essay finds that competition causes firms to acquire less information and that investment becomes more inefficient in competitive industries. Empirically investment efficiency is measured by a latent variable technique and related to competition using a Herfindahl-Hirschman index as well as more exogenous measure such as trade costs. The panel regression analysis provides strong support for the theory and shows that investment is more efficient in concentrated industries.
DegreeDoctor of Philosophy
SubjectCapital investments
Competition
Corporate governance
Dept/ProgramEconomics and Finance
Persistent Identifierhttp://hdl.handle.net/10722/206682

 

DC FieldValueLanguage
dc.contributor.advisorWong, KP-
dc.contributor.authorYi, Long-
dc.contributor.author易龍-
dc.date.accessioned2014-11-25T03:53:17Z-
dc.date.available2014-11-25T03:53:17Z-
dc.date.issued2014-
dc.identifier.citationYi, L. [易龍]. (2014). Product market competition and investment efficiency. (Thesis). University of Hong Kong, Pokfulam, Hong Kong SAR. Retrieved from http://dx.doi.org/10.5353/th_b5270556-
dc.identifier.urihttp://hdl.handle.net/10722/206682-
dc.description.abstractThis thesis consists of two essays on the impacts product market competition has on the real investment efficiency of firms. While the first essay looks at this question through the corporate governance angle and finds product market competition complements institutional investors in disciplining firms, the latter one studies the impacts from an information production point of view and concludes competition reduces the incentive of firms to acquire information thereby reduces investment efficiency. Using product market competition as a proxy for external corporate governance, the first essay documents a sizeable difference between the governance impact of institutional investors on firms with strong and weak external corporate governance. Higher institutional ownership is associated with real efficiency of firms, but only when external corporate governance is strong. The real efficiency is reflected in higher investment sensitivity to investment opportunities and higher firm value. Utilizing the passing of business combination laws as a negative shock to external corporate governance, the essay identifies that firms with higher institutional ownership suffer a larger decrease in real efficiency, suggesting external corporate governance such as product market competition is critical for institutional investors in disciplining firms. The second essay attempts to figure out the impact of product market competition from an ex ante point of view. Specifically, how does product market competition change the incentive of firms to acquire information about investment opportunities ex ante? The essay provides both a model and a series of extensive empirical tests. The model features a two-stage Bayesian game in differentiated products market competition. This essay finds that competition causes firms to acquire less information and that investment becomes more inefficient in competitive industries. Empirically investment efficiency is measured by a latent variable technique and related to competition using a Herfindahl-Hirschman index as well as more exogenous measure such as trade costs. The panel regression analysis provides strong support for the theory and shows that investment is more efficient in concentrated industries.-
dc.languageeng-
dc.publisherThe University of Hong Kong (Pokfulam, Hong Kong)-
dc.relation.ispartofHKU Theses Online (HKUTO)-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.rightsThe author retains all proprietary rights, (such as patent rights) and the right to use in future works.-
dc.subject.lcshCapital investments-
dc.subject.lcshCompetition-
dc.subject.lcshCorporate governance-
dc.titleProduct market competition and investment efficiency-
dc.typePG_Thesis-
dc.identifier.hkulb5270556-
dc.description.thesisnameDoctor of Philosophy-
dc.description.thesislevelDoctoral-
dc.description.thesisdisciplineEconomics and Finance-
dc.description.naturepublished_or_final_version-
dc.identifier.doi10.5353/th_b5270556-

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