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Corporate equity ownership, investment, and product market relationships

Clayton, Matthew J. and Jorgensen, Bjorn N. (2011) Corporate equity ownership, investment, and product market relationships. Journal of Corporate Finance, 17 (5). pp. 1377-1388. ISSN 0929-1199

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Identification Number: 10.1016/j.jcorpfin.2011.08.001


This paper examines the effect of corporate equity ownership on investment when firms have product market relationships. Firms have incentives to hold long equity positions when their products are complements. These equity positions induce the firms to increase their real investment expenditures. In contrast, firms have incentives to hold short equity positions when their products are substitutes. These short positions commit the firms to a more aggressive product market stance, and also result in increased real investment expenditures. Our model offers an explanation for the empirical relationship between the establishment of corporate equity stakes and increased investment spending documented by Allen and Phillips (2000).

Item Type: Article
Official URL:
Additional Information: © 2011 Elsevier B.V.
Subjects: H Social Sciences > HG Finance
Sets: Departments > Accounting
Collections > Economists Online
Date Deposited: 18 Jul 2013 15:21
Last Modified: 05 Jun 2014 11:00

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