Effects of Financial Constraints and Product Market Competition on Share Repurchases

This study aims to explore the driving factors of green innovation, and uses the micro- and macro-data from China’s sports goods manufacturing industries. In particularly, sports goods manufacturing enterprises are identified by the textual analysis of information disclosure, and the competitive environment faced by each enterprise is built through their unique closest rivals. Empirically, this study finds that competition and policy can promote green innovation in sports goods manufacturing industries, and industrial policy can moderate the role of product market competition in promoting green innovation. Considering the characteristics of the Chinese market, more industrial policies may intensify the competition among manufacturing enterprises, forcing such enterprises to obtain competitive advantages through innovation outcomes. It is worth noting that the association between product market competition and green innovation changes as financial constraints increase, and this may be caused by the impact of industrial policy on the interactions among enterprises. After implementing the strict environmental policy, product market competition and industrial policy can both promote green innovation. In high-polluting industries, sports goods manufacturing enterprises get more social attention and suffer from higher penalties for environmental violations, so that such enterprises will get more motivations from industrial policies to support green innovation. In addition, we also find that there is a significant inverted-U shape relationship between industrial policy and green innovation in sports goods manufacturing industries. As financial constraints increase, the non-linear relationship between product market competition and green innovation converts from a U shape relationship to an inverted-U shape relationship. Our findings can provide a better understanding of the investment of sports goods manufacturing enterprises in green innovation.

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Corporate payout policy: does product market competition matter? Evidence from Australia

International Journal of Managerial Finance ◽

10.1108/ijmf-10-2019-0406 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Hai-yen Pham ◽

Richard Chung ◽

Ben-Hsien Bao ◽

Byung-Seong Min

Keyword(s):

Market Competition ◽

Product Market ◽

Payout Policy ◽

Product Market Competition ◽

Share Repurchases ◽

Difference In Difference ◽

Content Type ◽

Difference Analysis ◽

Industry Competition ◽

The Impact

PurposeThe purpose of this paper is to examine the impact of product market competition on dividend payout and share repurchases in Australia in which a full dividend imputation system has been in place since 1987.Design/methodology/approachPanel data estimation with industry and year-fixed effects is employed to examine the role of industry competition on dividend payout and share repurchases. The paper uses a sample of ASX200 non-financial firms, including 4,272 observations over the period 1992–2015. To address the endogeneity problem, the authors utilize the event of Australia–United States Free Trade Agreement (AUSFTA), which became effective on 01 January 2005, and perform a difference-in-difference analysis.FindingsThe authors find that firms operating in competitive markets are likely to pay more dividends and repurchase more shares to reduce agency costs. The positive relation between industry competition and dividends is stronger among firms where the CEO and the Chairman of the Board are the same person and among firms with higher market-to-book ratio and higher standard deviation of stock returns. The study results are robust when the authors account for the impact of franking credit on dividend payment. In the difference-in-difference analysis, the authors find strong evidence of a casual relation that product competition drives changes in dividend policy.Practical implicationsThe findings are consistent with the notion that intense product market competition can mitigate agency conflicts between managers and shareholders and with the information signalling explanation of market competition. As such, regulators may want to introduce policies that encourage more market competition (e.g. market deregulation) to enhance market efficiency.Originality/valueThis study incorporates product market competition in explaining the firm payout policy.

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