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Competitive Pressure and Firm Investment Efficiency: Evidence from Corporate Employment Decisions

Author

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  • S. Boubaker

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie)

  • V.A. Dang
  • S. Sassi

Abstract

This study examines the link between product market competition and labour investment efficiency. We find that competitive pressure distorts the efficiency of corporate employment decisions by creating an underinvestment problem. This finding withstands a battery of robustness checks and remains unchanged after accounting for endogeneity concerns. Additional analysis shows that the relationship between product market competition and labour investment efficiency is stronger for firms facing higher competitive threats, greater financial constraints, higher information asymmetry and higher labour adjustment costs. Our results suggest that as competition increases bankruptcy risk, it leads managers to underinvest in labour to avoid incurring labour-related costs. \textcopyright 2021 The Authors. European Financial Management published by John Wiley & Sons Ltd.

Suggested Citation

  • S. Boubaker & V.A. Dang & S. Sassi, 2022. "Competitive Pressure and Firm Investment Efficiency: Evidence from Corporate Employment Decisions," Post-Print hal-04435621, HAL.
    • Handle: RePEc:hal:journl:hal-04435621
    DOI: 10.1111/eufm.12335
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    Cited by:

    1. Angi Skhvediani & Anastasia Koklina & Tatiana Kudryavtseva & Diana Maksimenko, 2023. "The Impact of Intellectual Capital on the Firm Performance of Russian Manufacturing Companies," Risks, MDPI, vol. 11(4), pages 1-25, April.
    2. Mengqin Zhang & Yi He & Surui Zhang & Xiang Zhang & Stavros Sindakis & Saloome Showkat, 2024. "Stock Liquidity and Investment Efficiency: Evidence from the New Regulation of Insider Selling in China," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 8563-8587, June.
    3. Hamza Nizar & Taher Hamza & Faten Lakhal, 2024. "How does institutional cross‐ownership affect firm productivity? The importance of the corporate social responsibility channel," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1988-2010, April.
    4. Ren, Yangqiu & Hu, Guoliu & Wan, Qing, 2024. "Environmental Protection tax and diversified transition of heavily polluting enterprises: Evidence from a quasi-natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1570-1592.
    5. Chowdhury, Hasibul & Estreich, Timothy & Hossain, Ashrafee & Zheng, Jiayi, 2024. "U.S. Political corruption and labor investment (in)efficiency," Global Finance Journal, Elsevier, vol. 60(C).
    6. Song, Jun Myung & Chung, Chune Young, 2023. "Female CEOs and investment efficiency in the Vietnamese market," Finance Research Letters, Elsevier, vol. 58(PA).

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