Product Market Threats, Payouts, and Financial Flexibility

  • Author(s): GERARD HOBERG, GORDON PHILLIPS, NAGPURNANAND PRABHALA
  • Published: Jan 07, 2014
  • Pages: 293-324
  • DOI: 10.1111/jofi.12050

ABSTRACT

We examine how product market threats influence firm payout policy and cash holdings. Using firms' product text descriptions, we develop new measures of competitive threats. Our primary measure, product market fluidity, captures changes in rival firms' products relative to the firm's products. We show that fluidity decreases firm propensity to make payouts via dividends or repurchases and increases the cash held by firms, especially for firms with less access to financial markets. These results are consistent with the hypothesis that firms' financial policies are significantly shaped by product market threats and dynamics.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version