Finance and the Product Market
Sunday, Jan. 8, 2017 1:00 PM – 3:00 PM
- Chair: Gregor Matvos, University of Chicago
Product Market Competition in a World of Cross-Ownership: Evidence From Institutional Blockholdings
AbstractWe analyze the effects of institutional cross-ownership of same-industry firms on product market performance and behavior. Our results show that cross-held firms experience significantly higher market share growth than non-cross-held firms. We establish causality by relying on a difference-in-differences approach based on the quasi-natural experiment of financial institution mergers. We also find evidence suggesting that institutional cross-ownership facilitates explicit forms of product market collaboration (such as within-industry joint ventures, strategic alliances, or within-industry acquisitions) and improves innovation productivity and operating profitability. Overall, our evidence indicates that cross-ownership by institutional blockholders offers strategic benefits by fostering product market coordination.
Financial Condition and Product Quality: The Case of Nonprofit Hospitals
AbstractFinancial constraints can cause firms to reduce product quality, especially when quality is difficult for consumers to observe. This paper tests this hypothesis in the context of nonprofit hospitals. Using large samples of heart attack patients and child deliveries, we test whether hospitals shift towards more intensive and more profitable treatment options as a result of a financial shock—the 2008 financial crisis—and whether the shock led to worse patient outcomes. We show that the crisis was followed by an unprecedented drop in hospital capital investments yet we find no overall effects on treatment choices or patient outcomes. These results are similar for nonprofits and for-profits. We find evidence that hospital governance, in particular separation of management and doctor decision-making, plays a role in shielding patients from undesirable shifts in quality in response to financial shocks.
- G3 - Corporate Finance and Governance