Strategic Investment and Industry Risk Dynamics

Product market competition and corporate investment: Evidence from China

“…Lastly, another study links competition in an industry with the variation in expected returns. Bustamante's (2015) model shows that strategic intra-industry interaction between firms affects the industry's cross section of betas and investment. The key strategic behavior is captured through the spread A C C E P T E D M A N U S C R I P T…”

“…The value of investing or waiting is typically examined from the industry structure framework. Contingent claims analysis suggests that in a dynamic industry setting, industry structure affects investment timing by impacting the value of waiting (see Williams, 1993;Kulatilaka and Perotti, 1998, Grenadier, 1996, 2002Akdoğu and MacKay, 2008;Bustamante, 2015). For example, in an industry in which firms do not hold exclusive rights to their growth options, the value of deferring investment must be weighed against the threat of losing those opportunities to competitors, i.e.…”

“…This index has evolved as the standard measure of product market competition in this literature (e.g., Tirole, 1988;Juan and Becerra, 2008;Akdoğu and MacKay, 2008;Giroud and Mueller, 2011;Bustamante, 2015).…”

Long Term Industry Reversals

“…Theoretical asset pricing models demonstrate that a firm's risk and returns can be a function of its industry characteristics (e.g. Berk et al, 1999;Calson et al, 2004Calson et al, , 2014Peress, 2010;Bustamante, 2015). 2 Consistent with theoretical predictions, empirical studies document that industry components can explain asset pricing regularities (e.g.…”

Buyouts Under the Threat of Preemption

“…For example,Hackbarth and Miao (2012),Hackbarth, Mathews, and Robinson (2014),Bustamante (2015),Bustamante and Donangelo (2017) 4Ruback (1983) is an early example of empirical studies that examine the presence of competition in the acquisitions market by looking at returns Boone and Mulherin (2007b),Boone and Mulherin (2007a). andBoone and Mulherin (2009) are among the first studies that provide comprehensive evidence of competition in the takeovers market Aktas, de Bodt, and Roll (2010).…”