This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. ASSA Annual Meeting
  3. 2025
  4. Program
  5. Finance and Industrial Organization
« Back to Results

Finance and Industrial Organization

Paper Session

Sunday, Jan. 5, 2025 10:15 AM - 12:15 PM (PST)

San Francisco Marriott Marquis, Yerba Buena Salon 10 & 11
Hosted By: American Finance Association
  • Maria Cecilia Bustamante, University of Maryland

Supply Chain Shortages, Large Firms’ Market Power, and Inflation

Francesco Franzoni
,
University of Lugano
Mariassunta Giannetti
,
Stockholm School of Economics
Roberto Tubaldi
,
BI Norwegian Business School

Abstract

Following supply chain disruptions, large firms are less impacted by the resulting shortages. Motivated by this new evidence, we develop a framework to explore the consequences of supply chain shortages on industrial structure. The main prediction is that large firms gain a competitive advantage over smaller competitors. Consistent with this conjecture, following supply chain shortages, the larger firms in an industry experience higher market share, profitability, markups, and stock returns, and smaller cost increases. Shortages are associated with higher price hikes in ex-ante more concentrated industries. This mechanism can explain up to 23% of U.S. inflation during 2021.

Board Connections, Firm Profitability, and Product Market Actions

Radhakrishnan Gopalan
,
Washington University-St. Louis
Renping Li
,
Washington University-St. Louis
Alminas Zaldokas
,
National University of Singapore

Abstract

A firm's gross margin increases by 0.8 p.p. after forming a new direct board connection to a product market peer. Gross margin also rises by 0.4 p.p. after a connection is formed to a peer indirectly through a third intermediate firm. Further, using barcode-level data of 2.7 million products, we show that new board connections are related to higher consumer good prices, a greater tendency for market allocation, and slower new product introductions. The effects are stronger when the newly connected peers share corporate customers or have similar business descriptions and hold when controlling for other inter-firm relationships.

Ownership and Competition

Alessio Piccolo
,
Indiana University
Jan Schneemeier
,
Michigan State University

Abstract

We model the tradeoffs of an investor who builds positions and exerts governance in competing firms. The investor's governance in a given firm reflects and affects her stakes in its product market rivals: she anticipates how a certain exposure to competing firms would influence her governance and incorporates that information when choosing her portfolio. This two-way interaction creates an incentive for the investor to hold undiversified portfolios, tilted toward the firms where she exerts more governance, and can be such that poor governance persists even in more competitive sectors, and shocks to competition in product markets carry over to ownership markets, and vice versa.

Discussant(s)
Ina Simonovska
,
University of California-Davis
Felipe Cabezon
,
Virginia Tech
Mina Lee
,
Federal Reserve Board
JEL Classifications
  • G3 - Corporate Finance and Governance