Product Market Competition and Corporate Real Estate Investment under Demand Uncertainty

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This article theoretically and empirically analyzes the interactions among corporate real estate investment, product market competition and firm risk. In our model, firms own strategic real estate or lease generic real estate. Our model predicts that strategic real estate ownership is positively correlated with industry concentration and negatively related to demand uncertainty. Also, firm risk is higher for firms with more strategic real estate operating in a more concentrated market. This prediction arises because smaller investments induce greater market competition, which effectively eliminates the right tail of the firm's profit distribution. We provide strong empirical support for our predictions. In particular, firm value is more volatile in less competitive markets for a given level of demand uncertainty.

Original languageEnglish (US)
Pages (from-to)521-590
Number of pages70
JournalReal Estate Economics
Volume45
Issue number3
DOIs
StatePublished - Sep 1 2017

Fingerprint

Demand uncertainty
Product market competition
Real estate investment
Real estate
Prediction
Firm risk
Firm value
Ownership
Market competition
Profit
Interaction
Industry concentration
Lease
Competitive market

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

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Product Market Competition and Corporate Real Estate Investment under Demand Uncertainty. / Ambrose, Brent William; Diop, Moussa; Yoshida, Jiro.

In: Real Estate Economics, Vol. 45, No. 3, 01.09.2017, p. 521-590.

Research output: Contribution to journalArticle

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