nep-ind New Economics Papers
on Industrial Organization
Issue of 2022‒03‒28
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Multi-product Firms in International Economics By Michael Irlacher
  2. Competition, profitability and financial leverage By Banal Estanol, Albert; Siciliani, Paolo; Yoon, Kyoungsoo

  1. By: Michael Irlacher
    Abstract: A striking pattern in transaction-level data is the concentration of international shipments in the hands of a few large firms. One common feature of dominating high-performance firms is that they produce multiple products and ship them to many destinations. Motivated by the emergence of highly detailed data at the firm-product-destination level, a series of theoretical and empirical papers studies the role of multi-product firms (MPFs) in international trade. This survey reviews the evidence on the importance of MPFs in international markets and highlights the key theoretical as well as empirical results that the literature has produced in the last decade.
    Keywords: Survey; Multi-product firms; International Economics; Theory; Empirics
    JEL: F10 F12 F14
    Date: 2022–02
    URL: http://d.repec.org/n?u=RePEc:jku:econwp:2022-01&r=
  2. By: Banal Estanol, Albert (Universitat Pompeu Fabra); Siciliani, Paolo (Bank of England); Yoon, Kyoungsoo (Bank of Korea)
    Abstract: We investigate the relationship between profitability and financial leverage for US listed non-financial corporations by taking into account the degree of product similarity among competing firms, which can drive intense pricing rivalry thus undermining the sustainability of high price-cost mark-ups. We find that in markets characterized by high price-cost mark-ups notwithstanding high product similarity, the relationship between profitability and financial leverage is negative. Instead, in the rest of the markets we find a positive relationship, consistent with the dynamic trade-off theory of corporate finance, whereby firms increase their degree of financial leverage in response to profitability improvements. Not only do firms exposed to comparatively higher degree of product substitutability make less use of financial leverage, but they also rely relatively less on long-term debt. The difference is especially attributable to the period after the great financial crisis.
    Keywords: Financial leverage; competition; profitability
    JEL: D21 G32 L13 L41
    Date: 2022–02–18
    URL: http://d.repec.org/n?u=RePEc:boe:boeewp:0962&r=

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