Does market competition make a difference in business strategy for listed companies?

Figures & data

Table 1. The measurements of all variables used in this study.

Items	Scale	Description	Source
Differentiation strategy (DIFF)	SG&A/ Sales	Selling, General &Administrative Expense/Net sales	Balsam et al. (2011), Fernando et al. (2016), Abernethy et al. (2019), Cho and Tsang (2020).
	Sales /COGS	Net sales/Cost of goods sold	Balsam et al. (2011), Fernando et al. (2016), Abernethy et al. (2019), Cho and Tsang, (2020).
Cost-leadership strategy (COST)	Sales/CAPEX	Net sales/Capital costs of fixed assets	Balsam et al. (2011), Fernando et al. (2016), Abernethy et al. (2019), Cho and Tsang (2020).
	Sales/PPE	Net sales/Book value of fixed assets	Balsam et al. (2011), Fernando et al. (2016).
	EMPL/Assets	Number of employees/ Total assets	Balsam et al. (2011), Abernethy et al. (2019), Cho and Tsang (2020).
Market competition (HHI)	$\mathrm{\text{HHI}}={\sum }_{j=1}^j{s}_{\mathit{\text{ij}}}^2$	Total squared market share in an industry	Giroud and Mueller (2010), Ghofar and Islam (2015), Zhang (2018), Yeh and Liao (2020).
Control variables	Firm size (SIZE)	Logarithm of total assets	Yameen et al. (2019), Nguyen et al. (2021).
	Fixed assets (TANG)	Fixed assets/Total assets	Linck et al. (2008), Khuong et al. (2020), Nguyen et al. (2021).
	Firm years (AGE)	Logarithm of firm year	Boone et al. (2007), Yameen et al. (2019), Yeh and Liao (2020).
	Leverage (DEBT)	Total debt/Total assets	Khuong et al. (2020), Yeh and Liao (2020), Nguyen et al. (2021).
	State ownership (SOE)	State ownership percentage	Cull and Xu (2005), Tran (2020), Al Amosh and Khatib (2021).

Source: Compiled by authors.

Figure 1. Research model.

Table 2. Statistical overview of eight competitive industries.

Year	Basic Materials	Consumer Cyclicals	Consumer Non-Cyclicals	Energy	Health care	Industrials	Technology	Utilities
2010	75	74	45	35	15	140	14	19
2011	78	73	44	35	16	144	14	19
2012	86	74	45	37	15	149	14	21
2013	87	75	44	37	16	157	15	23
2014	99	78	45	34	16	166	15	22
2015	113	80	50	37	17	177	15	26
2016	124	84	52	40	19	184	13	28
2017	122	87	57	41	19	183	15	28
2018	127	89	55	42	19	185	15	29
2019	128	87	51	43	19	183	16	29

Source: Author’s calculation.

Table 3. Descriptive statistics of the variables.

Variables	Obs	Mean	Std. Dev	Min	Max
HHI	4938	0.091	0.061	0.023	0.293
DIFF	4887	−0.00000003	1.000	−33.216	29.886
COST	4517	−0.00000001	1.000	−0.161	39.806
TANG	4851	0.266	0.218	0.0004	0.966
DEBT	4129	0.270	0.178	−0.00001	0.800
AGE	4932	2.604	0.559	0.693	4.779
SIZE	4889	27.055	1.511	23.362	32.236
SOE	4851	22.346	25.918	0.000	98.110

Source: Retrieved from STATA 14.2.

Table 4. Correlation matrix for the market competition model with cost-leadership strategy.

	COST	HHI	TANG	DEBT	AGE	SIZE	SOE
COST	1.000
HHI	0.036	1.000
TANG	−0.134	0.235	1.000
DEBT	0.036	−0.005	0.236	1.000
AGE	−0.018	0.012	−0.072	0.030	1.000
SIZE	0.018	0.142	0.142	0.305	0.091	1.000
SOE	−0.048	0.118	0.208	−0.020	−0.062	0.078	1.000

Source: Retrieved from STATA 14.2.

Table 5. Correlation matrix for the market competition model with differentiation strategy.

	DIFF	HHI	TANG	DEBT	AGE	SIZE	SOE
DIFF	1.000
HHI	0.074	1.000
TANG	0.122	0.238	1.000
DEBT	−0.063	0.006	0.248	1.000
AGE	−0.076	0.017	−0.073	0.033	1.000
SIZE	0.002	0.145	0.152	0.316	0.088	1.000
SOE	−0.005	0.115	0.210	−0.012	−0.055	0.088	1.000

Source: Retrieved from STATA 14.2.

Table 6. Panel-data unit-root tests.

Variables	Fisher test
HHI	20.5846***
TANG	29.1543***
DEBT	30.9710***
AGE	807.3066***
SIZE	40.1524***
SOE	7.0810***
COST	63.6693***
DIFF	30.5199***

*** p < 0.01.

Source: Retrieved from STATA 14.2.

Table 7. Results of the Kao Cointegration Test.

Tests	DIFF		COST
	t-statistic	p-value	t-statistic	p-value
Modified Dickey–Fuller	8.037	0.000	8.378	0.0000
Dickey–Fuller	3.615	0.000	3.516	0.0001
Augmented Dickey–Fuller	−23.411	0.000	−24.311	0.0000
Unadjusted modified Dickey–Fuller	−8.768	0.000	−8.783	0.0000
Unadjusted Dickey–Fuller	−10.884	0.000	−18.841	0.0000

Table 8. Regression results of the market competition model’s impact on cost-leadership and differentiation strategies.

Variables	COST	p-value	DIFF	p-value
HHI	0.645***	0.000	−0.993***	0.000
	(26.52)		(−4.40)
TANG	0.256***	0.000	0.256***	0.001
	(17.15)		(3.44)
DEBT	−0.155***	0.000	−0.099*	0.084
	(−13.33)		(−1.73)
AGE	0.042***	0.000	0.047	0.111
	(12.74)		(1.59)
SIZE	0.113***	0.000	0.067***	0.001
	(24.70)		(3.24)
SOE	0.002***	0.000	0.001*	0.090
	(18.48)		(1.70)
Obs	3,057		2,388
AR2	0.135		0.629
Hansen’s test	0.843		0.963
Hausman test	0.1524		0.0307
Breusch and Pagan Lagrangian test	0.0000
Modified Wald test			0.0000
Wooldridge test	0.0000		0.0000

t statistics in brackets: * p < 0.1, ** p < 0.05, *** p < 0.01.

Source: Retrieved from STATA 14.2.

Balsam, S., Fernando, G. D., & Tripathy, A. (2011). The impact of firm strategy on performance measures used in executivecompensation. Journal of Business Research, 64(2), 187–193. https://doi.org/10.1016/j.jbusres.2010.01.006

 Web of Science ®Google Scholar

Fernando, G. D., Schneible, R. A., Jr,., & Tripathy, A. (2016). Firm strategy and market reaction to earnings. Advances in Accounting, 33, 20–34. https://doi.org/10.1016/j.adiac.2016.04.006

 Web of Science ®Google Scholar

Abernethy, M. A., Kuang, Y. F., & Qin, B. (2019). The relation between strategy, CEO selection, and firm performance. Contemporary Accounting Research, 36(3), 1–13. https://doi.org/10.1111/1911-3846.12463

 Web of Science ®Google Scholar

Cho, E., & Tsang, A. (2020). Corporate social responsibility, product strategy, and firm value. Asia-Pacific Journal of Financial Studies, 49(2), 272–298. https://doi.org/10.1111/ajfs.12291

 Web of Science ®Google Scholar

Giroud, X., & Mueller, H. M. (2010). Does corporate governance matter in competitive industries? Journal of Financial Economics, 95(3), 312–331. https://doi.org/10.1016/j.jfineco.2009.10.008

 Web of Science ®Google Scholar

Ghofar, A., & Islam, S. (2015). Corporate governance and contingency theory. Springer.

 Google Scholar

Zhang, H. (2018, October 6). Product market competition and corporate governance: Substitutes or complements? Evidence from CEO duality. Evidence from CEO duality. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3088768.

 Google Scholar

Yeh, Y. H., & Liao, C. C. (2020). The impact of product market competition and internal corporate governance on family succession. Pacific-Basin Finance Journal, 62, 101346. https://doi.org/10.1016/j.pacfin.2020.101346

 Web of Science ®Google Scholar

Nguyen, T., Bai, M., Hou, Y., & Vu, M. C. (2021). Corporate governance and dynamics capital structure: Evidence from Vietnam. Global Finance Journal, 48, 100554. https://doi.org/10.1016/j.gfj.2020.100554.

 Web of Science ®Google Scholar

Linck, J. S., Netter, J. M., & Yang, T. (2008). The determinants of board structure. Journal of Financial Economics, 87(2), 308–328. https://doi.org/10.1016/j.jfineco.2007.03.004

 Web of Science ®Google Scholar

Khuong, N. V., Liem, N. T., Thu, P. A., & Khanh, T. H. T. (2020). Does corporate tax avoidance explain firm performance? Evidence from an emerging economy. Cogent Business & Management, 7(1), 1780101. https://doi.org/10.1080/23311975.2020.1780101

 Web of Science ®Google Scholar

Boone, A. L., Field, L. C., Karpoff, J. M., & Raheja, C. G. (2007). The determinants of corporate board size and composition: An empirical analysis. Journal of Financial Economics, 85(1), 66–101. https://doi.org/10.1016/j.jfineco.2006.05.004

 Web of Science ®Google Scholar

Yameen, M., Farhan, N. H., & Tabash, M. I. (2019). The impact of corporate governance practices on firm’s performance: An empirical evidence from Indian tourism sector. Journal of International Studies, 12(1), 208–228. https://doi.org/10.14254/2071-8330.2019/12-1/14

 Google Scholar

Cull, R., & Xu, L. C. (2005). Institutions, ownership, and finance: the determinants of profit reinvestment among Chinese firms. Journal of Financial Economics, 77(1), 117–146. https://doi.org/10.1016/j.jfineco.2004.05.010

 Web of Science ®Google Scholar

Tran, T. M. T. (2020). Corporate governance of banks in Vietnam and their roles on banks’ risk-taking and efficiency: a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Banking Studies at Massey University, Manawatu Campus, New Zealand (Doctoral dissertation, Massey University).

 Google Scholar

Al Amosh, H., & Khatib, S. F. (2021). Ownership structure and environmental, social and governance performance disclosure: The moderating role of the board independence. Journal of Business and Socio-Economic Development, 2(1), 49–66. https://doi.org/10.1108/JBSED-07-2021-0094

 Google Scholar