The Wealth Effect among Rivals: The Market-Resource Concerns

Spotlights on the action and response behaviors in strategy have augmented our knowledge of competitive interactions, yet a comprehensive understanding on the wealth effect of competitive behavior among rival firms remains unclear to the present. Also, how the integrative competitor analysis is employed to study such wealth effect among rival firms still lacks empirical analysis. Drawing from institutional theory, we find that the wealth effect of a responding firm is geared to that of an actor. That is, the institutional imitation settles a responding firm’s anxiety about uncertainty and ambiguity when a competitive action occurs. By evaluating market-resource considerations, we find that the wealth effect among rival firms is influenced by competitive tension factors such as market commonality and resource similarity between a pair of competing firms. This study therefore is employed to provide direct evidence of the wealth effect of competitive action announcements on that of rival firms to respond by means of collecting pairing news. Furthermore, this study also takes dynamic perspective to examine how integrative competitive analysis, i.e. market-resource concern, influences the wealth effect among rival firms. In conclusion, this study demonstrates the link between corporate finance literature and strategic thinking by considering the prominent themes in both research domains. The results of this study will be also beneficial to extend the author’s research pipeline on the interdisciplinary study of corporate finance and competitive dynamics.

Project ID:PF10312-0008
External Project ID:MOST103-2410-H182-028