Does the level of existing competition matter in determining conglomerate performance?
| Existing competition measured by HHI (domestic competition) | Existing competition measured by IPI (import competition) | |||||||
|---|---|---|---|---|---|---|---|---|
| Low competition | High competition | Low competition | High competition | |||||
| Variables | Sales growth | Cashflows | Sales growth | Cashflows | Sales growth | Cashflows | Sales growth | Cashflows |
| Conglomerate | 0.151* (1.695) | 0.049*** (2.600) | 0.079 (0.259) | 0.057 (0.571) | 0.067 (0.411) | 0.016 (0.469) | 0.260** (2.496) | 0.070*** (2.870) |
| Post2001 | −0.044 (−0.469) | −0.042** (−2.169) | 0.328 (0.568) | −0.037 (−0.200) | −0.059 (−0.294) | −0.070* (−1.652) | 0.062 (0.610) | −0.034 (−1.447) |
| Post2001 × NTRgap | −0.842*** (−3.766) | −0.461*** (−9.914) | −1.771* (−1.650) | −0.218 (−0.629) | −0.936** (−2.065) | −0.386*** (−4.016) | −1.056*** (−4.792) | −0.415*** (−8.036) |
| Conglomerate × Post2001 × NTRgap | 0.623*** (2.969) | 0.324*** (7.314) | −0.179 (−0.321) | 0.273 (1.444) | 0.889*** (2.778) | 0.347*** (5.151) | 0.328 (1.312) | 0.315*** (5.215) |
| NTRgap | 0.184 (0.316) | 0.065 (0.535) | −20.453*** (−10.444) | −0.324 (−0.485) | 1.298 (1.257) | 0.085 (0.401) | −2.582*** (−4.044) | −0.350** (−2.308) |
| IndustryQ | 0.192*** (3.759) | 0.002 (0.193) | 0.420** (2.041) | −0.030 (−0.444) | 0.211** (2.149) | −0.004 (−0.195) | 0.182*** (3.207) | −0.031** (−2.367) |
| Investment | 0.671*** (2.673) | −0.090* (−1.665) | −0.062 (−0.091) | 0.296 (1.200) | −0.329 (−0.619) | 0.151 (1.306) | 0.841*** (3.194) | −0.085 (−1.333) |
| Size | −0.527*** (−22.393) | 0.086*** (17.477) | −0.470*** (−9.532) | 0.104*** (6.182) | −0.431*** (−8.825) | 0.109*** (10.749) | −0.559*** (−23.447) | 0.082*** (14.579) |
| Cashflows | 0.014 (0.346) | – | −0.017 (−0.239) | – | 0.003 (0.037) | – | −0.015 (−0.372) | – |
| Salesgrowth | – | 0.001 (0.658) | – | 0.002 (0.329) | – | −0.002 (−0.654) | – | 0.002 (1.367) |
| Constant | 2.385*** (10.223) | −0.427*** (−8.777) | 11.984*** (11.653) | −0.290 (−0.817) | 1.631*** (3.314) | −0.541*** (−5.303) | 3.299*** (13.134) | −0.220*** (−3.688) |
| Segment fixed effect | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Year fixed effect | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Observations | 24,074 | 21,009 | 3,723 | 3,169 | 8,251 | 7,238 | 19,546 | 16,940 |
| R-squared | 0.043 | 0.038 | 0.131 | 0.036 | 0.025 | 0.040 | 0.062 | 0.036 |
| Existing competition measured by HHI | Existing competition measured by IPI | |||||||
|---|---|---|---|---|---|---|---|---|
| Low competition | High competition | Low competition | High competition | |||||
| Variables | Sales growth | Cashflows | Sales growth | Cashflows | Sales growth | Cashflows | Sales growth | Cashflows |
| Conglomerate | 0.151* (1.695) | 0.049*** (2.600) | 0.079 (0.259) | 0.057 (0.571) | 0.067 (0.411) | 0.016 (0.469) | 0.260** (2.496) | 0.070*** (2.870) |
| Post2001 | −0.044 (−0.469) | −0.042** (−2.169) | 0.328 (0.568) | −0.037 (−0.200) | −0.059 (−0.294) | −0.070* (−1.652) | 0.062 (0.610) | −0.034 (−1.447) |
| Post2001 × NTRgap | −0.842*** (−3.766) | −0.461*** (−9.914) | −1.771* (−1.650) | −0.218 (−0.629) | −0.936** (−2.065) | −0.386*** (−4.016) | −1.056*** (−4.792) | −0.415*** (−8.036) |
| Conglomerate × Post2001 × NTRgap | 0.623*** (2.969) | 0.324*** (7.314) | −0.179 (−0.321) | 0.273 (1.444) | 0.889*** (2.778) | 0.347*** (5.151) | 0.328 (1.312) | 0.315*** (5.215) |
| NTRgap | 0.184 (0.316) | 0.065 (0.535) | −20.453*** (−10.444) | −0.324 (−0.485) | 1.298 (1.257) | 0.085 (0.401) | −2.582*** (−4.044) | −0.350** (−2.308) |
| IndustryQ | 0.192*** (3.759) | 0.002 (0.193) | 0.420** (2.041) | −0.030 (−0.444) | 0.211** (2.149) | −0.004 (−0.195) | 0.182*** (3.207) | −0.031** (−2.367) |
| Investment | 0.671*** (2.673) | −0.090* (−1.665) | −0.062 (−0.091) | 0.296 (1.200) | −0.329 (−0.619) | 0.151 (1.306) | 0.841*** (3.194) | −0.085 (−1.333) |
| Size | −0.527*** (−22.393) | 0.086*** (17.477) | −0.470*** (−9.532) | 0.104*** (6.182) | −0.431*** (−8.825) | 0.109*** (10.749) | −0.559*** (−23.447) | 0.082*** (14.579) |
| Cashflows | 0.014 (0.346) | – | −0.017 (−0.239) | – | 0.003 (0.037) | – | −0.015 (−0.372) | – |
| Salesgrowth | – | 0.001 (0.658) | – | 0.002 (0.329) | – | −0.002 (−0.654) | – | 0.002 (1.367) |
| Constant | 2.385*** (10.223) | −0.427*** (−8.777) | 11.984*** (11.653) | −0.290 (−0.817) | 1.631*** (3.314) | −0.541*** (−5.303) | 3.299*** (13.134) | −0.220*** (−3.688) |
| Segment fixed effect | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Year fixed effect | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Observations | 24,074 | 21,009 | 3,723 | 3,169 | 8,251 | 7,238 | 19,546 | 16,940 |
| 0.043 | 0.038 | 0.131 | 0.036 | 0.025 | 0.040 | 0.062 | 0.036 | |
Notes:
This table presents the subsample regression results of whether the outperformance of conglomerate segments over single segment firms are conditional on the level of existing market competition. The dependent variables are segment sales growth and cash flows. The sample includes segments of US firms obtained from Compustat Industrial Segments data base. The definition of the variables is described in Appendix. T-statistics based on robust standard errors are reported in parentheses.
*;
**; and
*** denote statistical significance at the 10%, 5% and 1% levels, respectively
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