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Profiting from Induced Changes in Competitors' Market Values: The Case of Entry and Entry Deterrence

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  • Hansen, Robert G
  • Lott, John R, Jr

Abstract

The authors resurrects an idea due to J. Hirshleifer (1971) by examining how one firm might profit by trading in the securities of other firms whose values are dependent upon the first firm's actions. They focus on the case of entry: can an entrant profit from trading in the securities of an incumbent firm and how does the availability of such trading profits affect the economics of entry and entry deterrence? The authors' results have implications for antitrust policy, insider trading rules, the Williams Act, short selling rules, whether companies should be publicly or privately held, and the degree of diversification for companies. Copyright 1995 by Blackwell Publishing Ltd.

Suggested Citation

  • Hansen, Robert G & Lott, John R, Jr, 1995. "Profiting from Induced Changes in Competitors' Market Values: The Case of Entry and Entry Deterrence," Journal of Industrial Economics, Wiley Blackwell, vol. 43(3), pages 261-276, September.
    • Handle: RePEc:bla:jindec:v:43:y:1995:i:3:p:261-76
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    Cited by:

    1. Rajesh K. Aggarwal & Andrew A. Samwick, 1999. "Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(6), pages 1999-2043, December.
    2. Yang, Jianxia & Schmidbauer, Eric & Zhang, Lan, 2023. "Partial cross ownership, exclusive contracting, and market entry," Economics Letters, Elsevier, vol. 226(C).
    3. Yasuhiro Arikawa & Atsushi Kato, 2015. "Cross Shareholding and Initiative Effects," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(2), pages 305-319, February.
    4. Matthew J. Clayton & Bjorn N. Jorgensen, 1998. "Cross Holding and Imperfect Product Markets," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-020, New York University, Leonard N. Stern School of Business-.
    5. Li, Sanxi & Ma, Hongkun & Zeng, Chenhang, 2015. "Passive cross holding as a strategic entry deterrence," Economics Letters, Elsevier, vol. 134(C), pages 37-40.
    6. Clayton, Matthew J. & Jorgensen, Bjorn N., 2011. "Corporate equity ownership, investment, and product market relationships," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1377-1388.

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