Competition laws and corporate risk-taking around the world

Zhe Shen, Joseph Sowahfio Sowah, Cephas Simon Peter Dak-Adzaklo and Shan Li

Pacific-Basin Finance Journal, 2023, vol. 80, issue C

Abstract: Using a new dataset on international competition laws, we examine the relationship between country-level competition laws and corporate risk-taking in 58 countries from 1990 to 2010. Consistent with the disciplinary effect hypothesis, we document robust evidence of a negative relation between corporate risk-taking and the stringency of competition laws. The negative relation between competition laws and corporate risk-taking is more pronounced among financially constrained firms and less pronounced among firms situated in high-trust jurisdictions. Further analysis shows that competition laws affect corporate risk-taking by mitigating agency problems and enhancing information transparency. Overall, these findings are consistent with the view that competition plays a critical external corporate governance role in shaping corporate behaviors.

Keywords: Corporate risk-taking; Antitrust Laws; Competition (search for similar items in EconPapers)
JEL-codes: G15 G31 G38 K21 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x23001245

DOI: 10.1016/j.pacfin.2023.102058

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