BUSINESS STRATEGIES, COMPETITION IN THE PRODUCT MARKET AND
COMPANY PERFORMANCE
Name: RENAN NUNES DE BARROS
Publication date: 05/10/2023
Examining board:
Name |
Role |
|---|---|
| LUIZ CLAUDIO LOUZADA | Advisor |
Summary: Purpose - This research investigates specifics and combined effects regarding company
business strategy and marked competition on companies performances listed on the brazilian
stock exchange.
Design/methodology/approach - Public companies listed on the brazilian stock exchange
from 2001 to 2021 were analyzed. The business strategy was calculated using a composite
score following the adaptation suggested by Bentley, Omer and Sharp (2013) by Ittner,
Larcker and Rajan (1997) based on Miles and Snow (1978, 2003) structure. Product market
competition was measured using multiple dimensions Herfindahl-Hirschman (HHI),
Concentration Index (CR4) and Hall-Tideman Index (HTI). The accounting variables return
on assets (ROA) and return on equity (ROE) were used to measure companies performance.
Hypotheses were tested using the Ordinary Least Squares (OLS) method controlling for year
and company fixed effects. Furthermore, additional measures regarding business strategy,
diversification and economic cycles were used to test the robustness of the results.
Findings - The results show that, in a specific way, the companies business strategy adopted
does not exert significant effects on the performance, however companies in more competitive
sectors present greater performance than in less competitive markets. The moderating effect
of product market competition and business strategy on company performance proved to be
significant, as a whole, prospector companies that operate in more competitive markets
perform better, corroborating Zhang (2016). In addition, the inclusion of additional tests for
business strategies, product diversification and business cycles were observed that the results
were maintained or intensified in relation to initial findings.
Research limitations/implications – The results of this study help to identifying the various
stakeholders (forecast analysts, investors, auditors, regulators and managers) important
determinants related to these three dimensions, in order to verify and monitor the strategy to
be adapted by the company to achieve better performance in more or less competitive
environments. Finally, this study contributes to the theory development and advances in the
accounting field, economics and administration that investigate the performance of companies
based on accounting measures.
Originality/value – The findings of this work offer empirical evidence in the environment
brazilian companies, presenting a clear result that may differ in part from the results of
companies listed in other countries. This happens due to the particular situations of each
country, such as the quality of the capital market, institutional environment, tax system and
political and economic instability that must be considered before applying generalized
forecasts.
