Does more competition lead to more information production and greater investment efficiency? This question is largely unexplored in the finance literature. This article provides both a model and a series of extensive empirical tests. The model features a 2-stage Bayesian game in differentiated products market competition. We find that competition causes firms to acquire less information and investments to become more inefficient relative to a first-best case with the same market structure. Empirically, the panel regression analysis provides strong support for the theory and shows that investment is more efficient in concentrated industries.

In this paper, we empirically measure the impact of natural disasters on firm-level operating performance and examine if such impact can be mitigated by technology diversification. Using major natural disasters specified by Barrot and Sauvagnat (2015) and factory location data from the toxic release inventory (TRI) database, we first find that firms with factories located in states affected by natural disasters are much less profitable. Second, we find that firms with diversified technologies are significantly less subject to the impact of natural disasters, suggesting that technology diversity enhances firms’ sustainability.