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  4. Product Market Competition, Corporate Governance, and Firm Value: Evidence from the EU-Area
 
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Product Market Competition, Corporate Governance, and Firm Value: Evidence from the EU-Area

Journal
European Financial Management
ISSN
1354-7798
ISSN-Digital
1468-036X
Type
journal article
Date Issued
2013
Author(s)
Ammann, Manuel  
Oesch, David
Schmid, Markus  
DOI
10.1111/j.1468-036X.2009.00505.x
Abstract
This paper investigates whether the valuation effect of corporate governance depends on the degree of competition in the companies' product markets in a large international sample covering 14 countries from the European Union (EU). Besides providing external validity of previous U.S.-centered studies, this paper uses more comprehensive and reliable measures of both product market competition and corporate governance. Consistent with the hypothesis that product market competition acts as a substitute for corporate governance as competitive pressure imposes discipline on managers to maximize firm value, our results show that corporate governance significantly increases firm value in non-competitive industries only. When investigating the channels through which firm value may be increased, we find that good governance for firms in non-competitive industries leads them to have more capital expenditures, spend less on acquisitions and be less likely to diversify. Our results are robust to a large number of robustness checks including the use of alternative measures of competition and governance, as well as using alternative regression specifications.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1771622
Language
English
Keywords
Product Market Competition
Corporate Governance
Firm Valuation
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Wiley-Blackwell Publishing
Publisher place
Oxford UK
Volume
19
Number
3
Start page
452
End page
469
Pages
18
URL
https://www.alexandria.unisg.ch/handle/20.500.14171/89854
Subject(s)

business studies

Division(s)

s/bf - Swiss Institut...

SoF - School of Finan...

Eprints ID
72297
File(s)
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Thumbnail Image

open.access

Name

F_EFM_Product Market Competition.pdf

Size

683.5 KB

Format

Adobe PDF

Checksum (MD5)

855bac1877a6289d51ee8b890f0f2e50

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