Import competition and the composition of firm investments

Arbeitspapier

We study how foreign competition affects the composition of investments inside firms. A parsimonious model predicts that firms have an incentive to shift their investments towards more short-term assets when exposed to tougher competition. Using data on expenditures of listed US companies into various asset classes with different lifespans, we document empirical evidence that is consistent with this prediction. Over a fifteen year period between 1995 and 2009, the rise in import competition is associated with a reduction of the firm-specific asset lifespan by about 4.5% on average. We additionally exploit the Chinese WTO accession as an exogenous shock in firm expectations about future exposure to competition.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Munich Discussion Paper ; No. 2016-14

Classification and Topics

• Classification: Wirtschaft ; Empirical Studies of Trade ; Financial Aspects of Economic Integration ; Economic Impacts of Globalization: Finance ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Firm Objectives, Organization, and Behavior: General ; Firm Behavior: Empirical Analysis
• Subject: import competition ; firm investment behavior ; investment life-span ; shorttermism

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fromenteau, Philippe ; Schymik, Jan ; Tscheke, Jan
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
• (where): München
• (when): 2016

Further information

• DOI: doi:10.5282/ubm/epub.29654
• Handle: http://hdl.handle.net/10419/156368
• URN: urn:nbn:de:bvb:19-epub-29654-5
• Last update: 10.03.2025, 11:44 AM CET