Introduction to Corporate Finance and Product Market Competition

MSc. FIN40430 Strategic Finance Dr. Cormac Mac Fhionnlaoich Reflective Paper

“Corporate Finance and Product Market Competition”

Elchin Karimov – 09261966

Blackrock 2013

Table of Contents
Abstract………………………………………………………………………………...3
Introduction…………………………………………………………………………….3
Part I: Real Options and Games………………….………………….…………………4 * Competition vs. strategic alliances in consumer electronics……………………………...5 * Case of European airport expansion………………….………………….…………...5

Part II: The Real Effects of Corporate Cash Holdings………………….……………...6
Part III: Corporate Governance, Equity prices and Product Market Competition……..6

Part IV: Negative Aspects of Product Market Competition –
Financial Accounting Misreporting and Corporate Governance. ……………………..7

Conclusion………………….………………….………………….……………………9

Appendices
Bibliogpraphy.

Abstract
This paper reviews different Aspects of corporate finance and product market competition. It is important to understand the relation between these two topics in order to make short and long term financial decisions. I discuss 8 papers which are directly and partially related to the above mentioned topic and contribute to its understanding. I focus on the application of Game Theory rules to Corporate Finance and bring some examples of different strategies the managers can face during a game. I also bring forward a case study on European airports expansion to bring into light more examples. Further papers discuss effects of cash holdings on product market, relation of corporate governance to market competition and financial accounting misreporting in terms of market

Bibliography: Adrian (Wai-Kong) Cheung, “Product Market Competition, Corporate Investment and Financing: Evidence from Cash Flow Shortfall”, 2013, Curtin University, School of Economics and Finance. David H. Good, Lars-Hendrik Röller and Robin C. Sickles, “US Airline Deregulation: Implications for European Transport”, 1993, The Economic Journal, Vol. 103, No. 419 (Jul., 1993), pp. 1028-1041 DeFond, M., Park, C., 1999. “The Effect of Competition on CEO Turnover”. Journal of Accounting and Economics Vol. 27, pp. 35-56. Han T.J. Smit, Lenos Trigeorgis, “Real options and games: Competition, alliances and other applications of valuation and strategy”, 2003, Erasmus University Rotterdam and NIAS. Han T.J. Smit, “Infrastructure Investment as a Real Options Game: The case of European Airport Expansion”, 2003, Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) Karthik Balakrishnan, Daniel A. Cohen, “Product Market Competition, Financial Accounting Misreporting and Corporate Governance: Evidence from Accounting Restatements”, 2009, Stern School of Business, New York City. Laurent Fresard, “Financial Strength and Product Market Behavior: The Real Effects of Corporate Cash Holdings”, 2010, The Journal of Finance. Vol LXV, No 3 Xavier Giroud and Holger M. Mueller, “Corporate Governance, Product Market Competition, and Equity Prices”, 2011, The Journal of Finance, Vol LXVI, No 2.