Financial condition and product market cooperation

Matthew T. Gustafson, Ivan T. Ivanov and John Ritter

Journal of Corporate Finance, 2015, vol. 31, issue C, 1-16

Abstract: We provide evidence that existing studies relating financial condition to product market cooperation produce mixed results because of unique features of the industries examined. In particular, all evidence suggesting that poor financial condition decreases cooperation comes from the airline industry during periods of high idle capacity. Using a unique data set of aggregate airfare hikes and a more recent low-idle-capacity period, we find that poor financial condition is positively associated with product market cooperation. Although financially weak airlines appear to value the immediate cash flows of increased cooperation, only liquidity-constrained firms seem willing to incur the cost of cooperative attempts.

Keywords: Financial distress; Product market cooperation; Liquidity; Capacity constraints; Airfare hikes (search for similar items in EconPapers)
JEL-codes: G30 G32 G33 L11 L13 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:31:y:2015:i:c:p:1-16

DOI: 10.1016/j.jcorpfin.2014.12.014

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