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Market power and systematic risk

Hollstein, F., Prokopczuk, M. and Würsig, C. M. (2023) Market power and systematic risk. Financial Management. ISSN 1755-053X

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To link to this item DOI: 10.1111/fima.12438


We examine the impact of product market competition on firms' systematic risk. Using a measure of total product market similarity, we document a strong negative relationship between market power and market betas. The effect more than triples in the most recent period of low competition. Anticompetitive mergers result in a significant reduction in market betas. Firms facing less competition seem to be partially insulated from systematic discount‐rate shocks. Lower equity costs therefore imply that market power is partly self‐perpetuating.

Item Type:Article
Divisions:Henley Business School > ICMA Centre
ID Code:114123
Uncontrolled Keywords:Economics and Econometrics, Finance, Accounting


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