The impact of market power and financial flexibility on corporate investment policy

Philip T. Fliers

Applied Economics, 2025, vol. 57, issue 52, 8710-8725

Abstract: This study explores how market power and financial flexibility shape corporate investment policies among U.S. large and mature corporations, by estimating firm-specific, time-varying investment-to-added-value sensitivities. We find that firms with market power exhibit lower investment sensitivities, and this effect is more pronounced for the most financially flexible firms. We show that the firm’s debt capacity is an important moderator in the relationship between market power and investment sensitivities. Our findings support theoretical predictions that market power and financial flexibility jointly influence investment decisions. The implication is that a lack of competition impedes corporate investments. For investors, these findings highlight the need to monitor both the competitive landscape and financial flexibility of firms in their portfolios.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2024.2402575 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:57:y:2025:i:52:p:8710-8725

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2024.2402575

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().