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Industry Competition, Agency Problem, and Firm Performance

Listed author(s):
  • Sue-Fung Wang

    (School of Economics and Management, Wuhan University, Wuhan, China. Institution of Finance, National Chiao Tung University, Hsinchu, Taiwan.)

  • Yow-Jen Jou

    (School of Economics and Management, Wuhan University, Wuhan, China. Institution of Finance, National Chiao Tung University, Hsinchu, Taiwan.)

  • Ke-Chiun Chang

    ()

    (School of Economics and Management, Wuhan University, Wuhan, China.)

  • Kun-Wei Wu

    (School of Economics and Management, Wuhan University, Wuhan, China. Institution of Finance, National Chiao Tung University, Hsinchu, Taiwan.)

Registered author(s):

    The study investigates the relationship between industry competition and firm performance in relation to agency problem conditions. At the same time, the literature also stated that different levels of national corporate governance have different impacts on corporate performance. We also investigate whether or not the relation between industry competition and firm performance would be different under different levels of agency problem. Our empirical results show that the positive relation between industry competition and firm performance is relatively significant for firms with higher free cash flows that present severe agency problems. The results do not change under different levels of national corporate governance.

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    File URL: http://www.ipe.ro/rjef/rjef4_14/rjef4_2014p76-93.pdf
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    Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

    Volume (Year): (2014)
    Issue (Month): 4 (December)
    Pages: 76-93

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    Handle: RePEc:rjr:romjef:v::y:2014:i:4:p:76-93
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    2. repec:hrv:faseco:30747191 is not listed on IDEAS
    3. Nickell, Stephen & Nicolitsas, Daphne, 1999. "How does financial pressure affect firms?," European Economic Review, Elsevier, vol. 43(8), pages 1435-1456, August.
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    12. Schmidt, Klaus M., 1996. "Managerial Incentives and Product Market Competition," CEPR Discussion Papers 1382, C.E.P.R. Discussion Papers.
    13. Rafael La porta & Florencio Lopez-De-Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, June.
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    16. Giroud, Xavier & Mueller, Holger M., 2010. "Does corporate governance matter in competitive industries?," Journal of Financial Economics, Elsevier, vol. 95(3), pages 312-331, March.
    17. Karuna, Christo, 2007. "Industry product market competition and managerial incentives," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 275-297, July.
    18. Mitton, Todd, 2004. "Corporate governance and dividend policy in emerging markets," Emerging Markets Review, Elsevier, vol. 5(4), pages 409-426, December.
    19. Chua, Choong Tze & Eun, Cheol S. & Lai, Sandy, 2007. "Corporate valuation around the world: The effects of governance, growth, and openness," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 35-56, January.
    20. Antoinette Schoar, 2002. "Effects of Corporate Diversification on Productivity," Journal of Finance, American Finance Association, vol. 57(6), pages 2379-2403, December.
    21. Allayannis, George & Ihrig, Jane, 2001. "Exposure and Markups," Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 805-835.
    22. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    23. Haushalter, David & Klasa, Sandy & Maxwell, William F., 2007. "The influence of product market dynamics on a firm's cash holdings and hedging behavior," Journal of Financial Economics, Elsevier, vol. 84(3), pages 797-825, June.
    24. Nickell, Stephen & Nicolitsas, Daphne & Dryden, Neil, 1997. "What makes firms perform well?," European Economic Review, Elsevier, vol. 41(3-5), pages 783-796, April.
    25. Peter MacKay & Gordon M. Phillips, 2005. "How Does Industry Affect Firm Financial Structure?," Review of Financial Studies, Society for Financial Studies, vol. 18(4), pages 1433-1466.
    26. Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 191-213.
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