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Three Essays on Finance and Product Market Competition

Bae, Chang Suk (2021) Three Essays on Finance and Product Market Competition. Doctoral Dissertation, University of Pittsburgh. (Unpublished)

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This dissertation consists of three essays on finance and product market competition. In the first essay, I investigate corporate agility, the importance of which is emphasized in both field and academic research but understudied empirically. Using the business descriptions provided in firms’ 10-K filings with the SEC as the main input, I construct a novel measure of corporate agility and confirm its validity. Next, I identify various firm flexibility measures as the determinants of corporate agility. I next find that product market performance improves with agility in the short-run and firm survival likelihood increases with agility in the long-run. I also document that the benefits of corporate agility are particularly realized when firms face industry-wide common shocks such as R&D or M&A waves, or trade barrier reductions and that firms increase agility at the expense of short-term profitability. Lastly, I find that agility is a negative predictor of future returns even after controlling for other firm risks and characteristics.
In the second essay, I investigate negative externalities of innovations along supply chains by analyzing the effects of customers’ innovations on suppliers’ trade credit provision. I find that suppliers extend more trade credit after customers innovate, and the effect is robust to controlling for various firm characteristics and industry-specific market conditions and to addressing potential endogeneity issues. The effect is mainly driven by the holdup channel as opposed to the demand channel or the financing channel. Next, I document that greater technological overlap between customers’ innovation and suppliers’ innovations attenuates the effect. Lastly, I find that suppliers adopt more conservative financial policies and innovate more by learning from customer’s innovation.
In the third essay, I investigate industry spillover effects of corporate fraud. Using a sample of securities class action lawsuits, I document that fraud mitigates financial constraints of product market rivals. This positive intra-industry spillover effect is stronger for firms in more concentrated industries or firms with less analyst coverage. In contrast, fraud worsens financial constraints for firms in the top-supplier and top-customer industries of the fraud firms. The negative spillover effect is dependent on trade credit provision.


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Item Type: University of Pittsburgh ETD
Status: Unpublished
CreatorsEmailPitt UsernameORCID
Bae, Chang
ETD Committee:
TitleMemberEmail AddressPitt UsernameORCID
Committee ChairThomas,
Committee MemberKenneth,
Committee MemberDenis,
Committee MemberBargeron,
Date: 7 July 2021
Date Type: Publication
Defense Date: 21 May 2021
Approval Date: 7 July 2021
Submission Date: 1 July 2021
Access Restriction: No restriction; Release the ETD for access worldwide immediately.
Number of Pages: 199
Institution: University of Pittsburgh
Schools and Programs: Joseph M. Katz Graduate School of Business > Business Administration
Degree: PhD - Doctor of Philosophy
Thesis Type: Doctoral Dissertation
Refereed: Yes
Uncontrolled Keywords: Product market competition, textual analysis, corporate agility, innovation
Date Deposited: 07 Jul 2021 11:17
Last Modified: 07 Jul 2021 11:17


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