Economics at your fingertips  

Does product market competition discipline managers? Evidence from exogenous trade shock and corporate acquisitions

Azizjon Alimov ()
Additional contact information
Azizjon Alimov: IESEG School of Management, LEM-CNRS UMR 9221

No 2021-ACF-05, Working Papers from IESEG School of Management

Abstract: This paper uses the 1989 Canada-U.S. Free Trade Agreement (FTA) to study the effect of increased foreign competition on the efficiency of corporate acquisition decisions. Following the FTA, U.S. acquirers exposed to greater increases in competitive pressure experience higher announcement returns. The positive impact of increased competition is stronger in acquirers with relatively higher agency costs prior to the FTA. Managers of acquirers exposed to greater foreign competition are more likely to be terminated following value-destroying acquisitions. Overall, these results are consistent with an active role for product market competition in disciplining managers with respect to important investment decisions. These results have broader implications: a rise in foreign competition can potentially improve the efficiency of key managerial decisions.

Keywords: Trade Liberalization; Mergers and acquisitions; Competition; Governance. (search for similar items in EconPapers)
JEL-codes: D43 F13 G34 (search for similar items in EconPapers)
Pages: 49
Date: 2021-08
New Economics Papers: this item is included in nep-cfn, nep-com, nep-int and nep-isf
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

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:

Access Statistics for this paper

More papers in Working Papers from IESEG School of Management Contact information at EDIRC.
Bibliographic data for series maintained by Joao DA CUNHA ().

Page updated 2023-06-04
Handle: RePEc:ies:wpaper:f202105