Product Market Competition and Financial Default in Private Firms
This study investigates the relation between product market competition and financial default. Prior literature offers alternative views on how competition affects default, predicting either a positive relation, related to a risk-increasing effect, or a negative relation, related to a disciplinary effect. Using a sample of Italian private firms, we provide evidence that the risk-increasing effect of competition prevails over the disciplinary effect. The results are robust to different competition measures and endogeneity tests. Further, we find that the default prediction models including product market fluidity have a significantly higher predictive ability than other models, even when adding industry fixed effects
Year of publication: |
2022
|
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Authors: | Cenciarelli, Velia G. ; Greco, Giulio ; Mattei, Marco Maria |
Publisher: |
[S.l.] : SSRN |
Saved in:
freely available
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