Topic:

Multi-Market Contact and Firm Returns

Time&Date: 

10:30 am - 12:00 pm, April 12, 2024 (Friday)

Venue

Room 619, Teaching A Building

Speaker:

Dr. Jun Oh (Hong Kong University of Science and Technology)

We examine the link between multi-market contact, a form of implicit collusion, and firms’ expected returns. By exploiting highly granular retail scanner data, we construct a novel firm-level measure of multi-market contact based on the degree of overlap in geographic and product markets with competitors. We validate the measure by demonstrating that the measure is positively associated with product prices, consistent with multi-market contact fostering mutual forbearance (i.e., firms compete less vigorously in terms of pricing strategies). We find that firms with more multi-market contact earn higher returns. This relation varies with institutional investors’ soft information and the amount of product market information disclosed in firms’ public filings, consistent with the return pattern being driven by information processing frictions. This study provides empirical evidence of how product market structure is priced by investors in financial markets.

Biography:

Prof. Jun Oh is an Assistant Professor of Accounting at the Hong Kong University of Science and Technology (HKUST). His research focuses on the intersection of firms’ information environments and industrial organization topics, such as antitrust, product markets, innovation, and contracting. Specifically, his research demonstrates how firms strategically disclose information and the consequences such disclosures have on stakeholders, such as competitors and regulators. He received his Ph.D. degree from Cornell University.