Journal of Finance Vol. 69 No. 1 2014

Product Market Threats, Payouts, and Financial Flexibility

Gerard Hoberg^1,2; Gordon M. Phillips^3,1,4; Nagpurnanand Prabhala^5,6

¹ Ionis Pharmaceuticals (United States) · ² University of Maryland, College Park · ³ University of Southern California · ⁴ California Southern University · ⁵ Conference Board · ⁶ University of Hong Kong

Abstract

We examine how product market threats influence firm payout policy and cash holdings. Using firms' product text descriptions, we develop new measures of competitive threats. Our primary measure, product market fluidity, captures changes in rival firms' products relative to the firm's products. We show that fluidity decreases firm propensity to make payouts via dividends or repurchases and increases the cash held by firms, especially for firms with less access to financial markets. These results are consistent with the hypothesis that firms' financial policies are significantly shaped by product market threats and dynamics.

DOI

10.1111/jofi.12050

Volume

69

Issue

1

Pages

293-324

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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