Financial Constraints and Industry Dynamics

Itzhak Ben-David, Zhi Li and Zexi Wang
Additional contact information
Zhi Li: Chapman U
Zexi Wang: U of Bern

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: It is well-established that financially constrained firms scale down their investment activity. The lost investment opportunities, however, could potentially be captured by other firms that are less financially constrained. We test this proposition using the Reg SHO pilot regulation, which relaxed short-selling constraints for about 30% of firms and thus tightened their financial constraints. Following the introduction of the regulation, pilot firms indeed reduced their investments, while their direct competitors increased their investments, expanded their market share, and became more profitable. We conclude that opportunities lost due to financial constraints could be salvaged by competing firms.

JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-cfn
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://ssrn.com/abstract=3178236
Our link check indicates that this URL is bad, the error code is: 410 Gone (http://ssrn.com/abstract=3178236 [301 Moved Permanently]--> https://ssrn.com/abstract=3178236 [301 Moved Permanently]--> https://www.ssrn.com/abstract=3178236 [302 Moved Temporarily]--> https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3178236)

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:ecl:ohidic:2018-09

Access Statistics for this paper

More papers in Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics Contact information at EDIRC.
Bibliographic data for series maintained by (workingpapers@econlit.org).