How Do Firm Financial Conditions Affect Product Quality and Pricing?

Phillips, Gordon; Sertsios, Giorgo

doi:10.1287/mnsc.1120.1693

Cited by 107 publications

(83 citation statements)

References 49 publications

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“…Since 1985, the percentage of available airline seats sold has increased from approximately 60% to 82%, amounting to a 55% decrease in idle capacity. In addition, a substantial fraction of the decrease in idle capacity occurs between 2002 and 2006. This trend towards less idle capacity along with our empirical evidence highlight the uniqueness of the results in Borenstein and Rose (1995), Busse (2002), and Phillips and Sertsios (2013). These earlier results rely on three characteristics of the airline industry during earlier sample periods: empty seats on already scheduled flights are not costly to fill, empty seats on flights that have taken off have no value, and flights often take off with a substantial fraction of empty seats.…”

Section: Introductionsupporting

confidence: 74%

“…For instance, Chevalier (1995a,b), Scharfstein (1995, 1996), Phillips (1995), andCampello (2003) all find that poor financial condition leads to more cooperation or higher price markups. In contrast, Borenstein and Rose (1995), Busse (2002), and Phillips and Sertsios (2013) find that poor financial condition reduces the incentive to cooperate.…”

Section: Introductionmentioning

confidence: 94%

“…Using data spanning 1985-1992and 1997-2008, Borenstein and Rose (1995, Busse (2002), and Phillips and Sertsios (2013) find that financial distress is associated with more competitive pricing because distressed firms benefit most from the immediate revenues generated from cutting prices. The theory of Staiger and Wolak (1992) rationalizes this apparent inconsistency by showing that the benefits of price wars are increasing in idle capacity.…”

Section: Introductionmentioning

confidence: 99%

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Financial condition and product market cooperation

Gustafson

Ivanov

Ritter

2015

Journal of Corporate Finance

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We provide evidence that existing studies relating financial condition to product market cooperation produce mixed results because of unique features of the industries examined. In particular, all evidence suggesting that poor financial condition decreases cooperation comes from the airline industry during periods of high idle capacity. Using a unique data set of aggregate airfare hikes and a more recent low-idle-capacity period, we find that poor financial condition is positively associated with product market cooperation. Although financially weak airlines appear to value the immediate cash flows of increased cooperation, only liquidity-constrained firms seem willing to incur the cost of cooperative attempts.Published by Elsevier B.V.JEL classification: G30 G32 G33 L11 L13

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Section: Introductionsupporting

confidence: 74%

Section: Introductionmentioning

confidence: 94%

Section: Introductionmentioning

confidence: 99%

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Financial condition and product market cooperation

Gustafson

Ivanov

Ritter

2015

Journal of Corporate Finance

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“…These three approaches can be placed in the provider's sphere, the customer's sphere, and/or in the sphere of interaction. I have excluded the value-based approach, with research that emphasise the unobserved quality related to pricing (e.g., Kirmani and Rao 2000;Phillips and Sertsios 2013), and the transcendent approach, which argues that quality is recognised only through experience and evaluated with abstract terms in fields such as music and art (Reeves and Bednar 1994). These two approaches are either too vague or their emphasis is beyond the scope of this thesis, and are therefore not further used when quality is demarcated.…”

Section: A Framework Of Quality Conceptsmentioning

confidence: 99%

Understanding Solution Quality

Johansson¹

2016

Linköping Studies in Science and Technology. Dissertations

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The integration of services and products into solutions can open up new business opportunities for firms. This thesis concerns how firms can provide solutions that are perceived as high quality. Solutions are often provided over several years, which implies a changed customer relationship compared to product provisions. Since the solution aims to support the customer's activities, firms face new challenges when introducing solutions. One challenge is to integrate all components and activities of the solution, and simultaneously support the customer's activities. In addition, the firm must ensure that the solution and all of its parts are of high quality.Most of the existing research on quality is related to the management of a firm's internal activities and the interaction during exchange. Within the research on quality, customer orientation means that a firm should manage the relevant product or service to meet customer requirements. When this is achieved, the product or service is of high quality. Since solutions are seen as services and products that are integrated as an outcome, as well as a customer relational process that aims to support the customer's activities, firms have little to learn from previous research about the quality of solutions.The aim of this thesis is to increase knowledge about how to manage solution quality. The thesis combines insights from research on quality with research on solutions and servitization. Three research questions are answered. The first question concerns the content of solution quality; the second deals with how firms can, with support from interventions, meet the new challenges that arise from solution provision; and the third question concerns how customers can be involved to achieve solution quality. The research questions are answered through five papers based on literature studies and empirical data. The papers contribute to an increased knowledge of solution quality and how firms can work to achieve it.The results of the thesis suggest that solution quality is built on seven quality dimensions: reliability, communicability, internal consistency, empathy, approachability, tangibility, and adaptability. In addition, knowledge of processes and customer relationships are two prerequisites for the concept. These dimensions and prerequisites are supported by interventions that can provide a change. However, it has become evident that whatever intervention is used must be related to the dimensions that are supposed to be improved. Furthermore, customer involvement is argued to be an intervention to support the prerequisites for solution quality, especially iv during the solution development. The results of this thesis extend the research on quality by increasing the knowledge of the solution quality concept and by changing the view of customers and their involvement during solution development.v SAMMANFATTNING Den här avhandlingen berör hur företag kan möjliggöra så att produkter och tjänster, integrerade i så kallade helhetslösningar, kan levereras med hög kval...

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“…5 When firms enter financial distress, they may also alter their product quality decisions (Maksimovic and Titman (1991)). Phillips and Sertsios (2013) investigate the relation between financial distress, bankruptcy, and product quality in the airline industry. They find that product quality, measured in terms of mishandled baggage and ontime performance, declines when airlines are in financial distress and increases when airlines are in bankruptcy.…”

Section: Financial Distress and Bankruptcymentioning

confidence: 99%

Supplier/customer considerations in corporate financial decisions

Kale

Meneghetti

2014

IIMB Management Review

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Earlier research focussed on firm characteristics and the interests of financial stakeholders (shareholders and bondholders) as determinants of corporate policies. Subsequent research recognized that corporate policies are determined in a broader environment that includes nonfinancial stakeholders such as suppliers, customers, labour etc. In this paper, we summarize the theoretical and empirical research that includes supplier/customer considerations in the determination of corporate policies such as capital structure, dividends, takeovers, earnings management, and product quality. We highlight the significant effect that the inclusion of supplier/customer interests has on these corporate policies.

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How Do Firm Financial Conditions Affect Product Quality and Pricing?

Cited by 107 publications

References 49 publications

Financial condition and product market cooperation

Financial condition and product market cooperation

Understanding Solution Quality

Supplier/customer considerations in corporate financial decisions

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