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Product Market Competition and Financial Decisions During a Financial Crisis
Author(s) -
Byoun Soku,
Xu Zhaoxia
Publication year - 2015
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12096
Subject(s) - finance , financial crisis , competitor analysis , business , market share , competition (biology) , product market , financial system , indirect finance , product (mathematics) , external financing , market competition , financial market , economics , market economy , marketing , debt , ecology , geometry , mathematics , biology , macroeconomics , incentive
We find that in the presence of the “flight to quality” during the 2007‐2008 financial crisis, firms that depended less on external financing (or internal finance dependent (IFD) firms) prior to the crisis were able to secure additional financing and increased investments, while external finance dependent (EFD) firms significantly contracted their external financing and investments. IFD firms’ increased investments during the crisis were associated with higher market share growth, while EFD competitors lost their market share. The results indicate that firms’ financial decisions during the financial crisis are interrelated with their product market dimensions.