시장경쟁질서와 기업의 재무정책

Abstract

This study investigates whether market competition order affects corporate financial policy and also the interaction between market competition and financial constraint by using Korean manufacturing firms listed in KOSPI market over 1981 to 2013. Based on the previous dynamic cash model from the theoretical background, the industry equilibrium provides the evidence of the effect of market competition on financial cash or liquidity policy. This model also finds that financial constrained firms use cash reserve withstand liquidity shortfalls during recession economy condition. This fact implies that market competition order triggers two contrasting effects. First, it increases the option value to remain active in the market, which means reinforcing the precautionary motive for holding cash or liquidity asset. Second, it induces the firms to reduce leverage and interest payments on debt. Thus lower debt payments require a smaller amount of cash or liquidity reserve, other things being equal. Although the overall effect is potentially ambiguous, under realistic conditions, cash increases with competition. Therefore, this prior study suggests that competition can explain the increase in cash holdings and exacerbate the negative relation between leverage and cash in this paper. In summarizing all of results from theoretical and empirical predictions, we find that product market competition order affects positively the financial policy, such as the level of cash holdings or liquidity policy, and also firms with higher financial constraint and higher product market competition order tends to increase the cash holdings or liquidity policy. Based on this prediction from model, we confirm that the results predicted from model support the evidence from real data using sample of non-financial firms listed in KOSPI market. To find more strong results, we use several various proxies for product market competition like number of competitive firm in a same industry, Herfindahl-Hirschman Index (HHI), and excess of price-cost margin (EPCM), and financial constraint like SA Index, and then confirm the predicted result from the model. Also we implement various estimation methods, which are OLS and fixed effect model to find the evidence predicted in the model. We find in empirical test as follows: First, we show that order of product market competition by using number of firms, HHI, and EPCM affect negatively the cash holdings or liquidity policy, which are all financial policies. This empirical result is inconsistent with predicted result from the model. This evidence implies that Korean non-financial firms tend to decrease the cash holdings as the product market competition increases. Thus we guess that there is a unique characteristic of Korean non-financial firms in terms of the product market competition and the cash holdings. Second, we find that the intensity of product market competition increases with the intensity of financial constraints, which is consistent with the predicted result from the model. Third, we also find that the effect of intensity of market competition on cash holdings increases with the intensity of financing constraints, which is consistent with the predicted result from the model. We conclude that the empirical evidences found in this paper are robust regardless of several competition measures and estimation methods. These findings suggest that the intensity of product market competition and financial constraint play a key role in decision making of firm’s financial policies such as cash holdings policy or liquidity policy in terms of firm operation.