Location of Repository

Real and Financial Industry Booms and Busts

By GERARD HOBERG and GORDON PHILLIPS

Abstract

We examine how product market competition affects firm cash flows and stock returns in industry booms and busts. Our results show how real and financial factors interact in industry business cycles. In competitive industries, we find that high industry-level stock market valuation, investment, and financing are followed by sharply lower operating cash flows and abnormal stock returns. Analyst estimates are positively biased and returns comove more. In concentrated industries these relations are weak and generally insignificant. Our results are consistent with participants in competitive industries not fully internalizing the negative externality of industry competition on cash flows and stock returns. Copyright (c) 2009 the American Finance Association.

DOI identifier: 10.1111/j.1540-6261.2009.01523.x
OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.blackwell-synergy.c... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.