How are industry concentration and risk factors related? Evidence from Brazilian stock markets

Rogério Mazali

New Zealand Economic Papers, 2017, vol. 51, issue 2, 148-176

Abstract: We isolate the two factors pointed out by previous literature as potential causes for the documented relation between returns and industry concentration: innovation risk (Creative Destruction Hypothesis, Dominant Replacement Effect Hypothesis) and distress risk (Market Power Hypothesis). Brazilian law allows us to isolate the two effects. Using data from Brazilian firms listed in BOVESPA, we estimate a regression model that uses State-Controlled Enterprises as a control group to separate the concentration/returns trade-off in two risk components. We find little evidence of the existence of a relation between industry concentration and stock returns. However, we do find evidence of the existence of innovation and market power effects. Oligopolistic firms are responsible for most of the investment ininnovation. Our findings do not support the Creative Destruction Hypothesis. They support the Dominant Replacement Effect Hypothesis.

Date: 2017
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00779954.2017.1314317 (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:nzecpp:v:51:y:2017:i:2:p:148-176

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RNZP20

DOI: 10.1080/00779954.2017.1314317

Access Statistics for this article

New Zealand Economic Papers is currently edited by Dennis Wesselbaum

More articles in New Zealand Economic Papers from Taylor & Francis Journals
Bibliographic data for series maintained by ().