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Competition and Operating Volatilities around the World

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  • Makaew, Tanakorn
  • Maksimovic, Vojislav

Abstract

Numerous papers have shown that developing economies are more volatile. We show that, despite greater aggregate and industry stability, performance and size of individual firms in developed countries are more volatile. In developing countries, market imperfections insulate incumbent firms from competition. Consistent with this, firms in developing countries have higher profit, higher market concentration, and less capital raising. Cross-country differences in operating risk and competition intensity are greater in industries that are dependent on external finance, where we expect higher impacts of capital-market imperfections. We show the inverse relation between aggregate and firm-level volatilities has important implications for international studies of cash holding.

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  • Makaew, Tanakorn & Maksimovic, Vojislav, 2020. "Competition and Operating Volatilities around the World," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(2), pages 517-547, March.
    • Handle: RePEc:cup:jfinqa:v:55:y:2020:i:2:p:517-547_5
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    Cited by:

    1. Lin, Xiaowei & Li, Ao & Zhang, Pengdong & Chen, Wenchuan, 2023. "The disciplinary role of product market competition on cash holding," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 653-671.

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