Financial Strength and Product Market Competition: Evidence from Asbestos Litigation

Hadlock, C J and Sonti, R (2012) Financial Strength and Product Market Competition: Evidence from Asbestos Litigation. Journal of Financial and Quantitative Analysis, 47 (1). 179–211.

Full text not available from this repository. (Request a copy)

Abstract

We study the role of financial strength on product market competition by examining exogenous shocks to a firm’s liability structure arising from asbestos litigation. We find that exogenous increases (decreases) in asbestos liabilities are interpreted by the market as negative (positive) news for a firm’s close competitors. These reactions are magnified in events in which one asbestos-tainted firm goes bankrupt and other asbestos-tainted stocks fall on the news of the bankruptcy. For smaller competitors, market reactions are more pronounced in more concentrated industries. Our findings support the general hypothesis that increases in fixed liabilities lead to more aggressive product market interactions.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Sonti, Rhttps://orcid.org/0000-0001-7540-4243
Item Type: Article
Uncontrolled Keywords: Financial Strength, Product Market Competition
Subjects: Finance
Finance > Financial Institutions
Depositing User: Veeramani R
Date Deposited: 17 Oct 2018 08:08
Last Modified: 11 Jun 2019 09:21
URI: http://eprints.exchange.isb.edu/id/eprint/635
Publisher URL: https://doi.org/10.1017/S0022109011000639
Publisher OA policy: http://www.sherpa.ac.uk/romeo/issn/0022-1090/
Related URLs:

Actions (login required)

View Item View Item
Statistics for DESI ePrint 635 Statistics for this ePrint Item