Product Market Strategy and Corporate Policies

115 Pages Posted: 12 Jul 2019 Last revised: 13 Jan 2023

See all articles by Jakub Hajda

Jakub Hajda

HEC Montreal - Department of Finance

Boris Nikolov

University of Lausanne; Swiss Finance Institute; European Corporate Governance Institute (ECGI)

Date Written: June 10, 2022

Abstract

We examine how product life cycle affects investment and financing by estimating an industry equilibrium model that embeds product portfolio characteristics. In the model, firms trade off higher profitability of newer products versus product introduction costs. Using product-level data, we find that the product dimension is critical in quantitatively explaining cash flow dynamics, corporate policies, and industry structure. We show that product introductions and capital investment are complements and that product dynamics incentivize preserving more debt capacity. Our estimates reveal that product life cycle is more pronounced for firms with smaller and more concentrated product portfolios as well as those with high product variety.

Keywords: Product market strategy, product life cycle, investment, capital structure, structural estimation

JEL Classification: G31, G32

Suggested Citation

Hajda, Jakub and Nikolov, Boris, Product Market Strategy and Corporate Policies (June 10, 2022). Swiss Finance Institute Research Paper No. 21-02, Available at SSRN: https://ssrn.com/abstract=3354748 or http://dx.doi.org/10.2139/ssrn.3354748

Jakub Hajda (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Boris Nikolov

University of Lausanne ( email )

Lausanne, CH-1015
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
413
Abstract Views
2,055
Rank
130,357
PlumX Metrics