Financial condition and product market cooperation

Matthew T. Gustafson, Ivan T. Ivanov, John Ritter

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

We provide evidence that existing studies relating financial condition to product market cooperation produce mixed results because of unique features of the industries examined. In particular, all evidence suggesting that poor financial condition decreases cooperation comes from the airline industry during periods of high idle capacity. Using a unique data set of aggregate airfare hikes and a more recent low-idle-capacity period, we find that poor financial condition is positively associated with product market cooperation. Although financially weak airlines appear to value the immediate cash flows of increased cooperation, only liquidity-constrained firms seem willing to incur the cost of cooperative attempts.

Original languageEnglish (US)
Pages (from-to)1-16
Number of pages16
JournalJournal of Corporate Finance
Volume31
DOIs
StatePublished - Apr 1 2015

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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