April 2021, Zheng Zhen (first author), Department of Accounting/Accounting Development Research Center, Xiamen University, the paper "Product market competition and the cost of equity capital" authored by Liu Xinming (corresponding author) and co-authors was published in the Journal of Business Research.

Abstract of the paper

This paper provides empirical evidence that firms in more competitive industries have lower cost of equity capital than those in concentrated industries. The association between product market competition and the cost of equity capital is more pronounced with lower analyst coverage, lower forecast accuracy, higher forecast dispersion, and higher bid-ask spread. Using import tariff rate reductions as a quasi-natural experiment, we find that tariff reductions intensify domestic product market competition, which in turn reduces firms’ cost of equity capital. When the tariff rate reduction is larger, the more intensified competition reduces the cost of equity capital to a greater extent. Tariff rate reductions also influence firms’ financing policy, cash flow from operations, and growth rate.

Introduction of the author

Zheng Zhen is an associate professor of Accounting, School of Management, Xiamen University. In 2016, she joined the School of Management of Xiamen University and undertook the course teaching of Principles of Accounting, Measurement Technology and Statistical Methods, forensic Accounting and audit, and audit theory and method research. Her research interests include information disclosure, capital markets and accounting and taxation. It has been published in the Journal of the American Taxation Association, European Accounting Review, British Accounting Review, Journal of Business Research and other journals published papers. She has presided over the Youth Project of the National Natural Science Foundation, the special fund for basic scientific research of central universities, and participated in major projects of the National Natural Science Foundation, major projects of the National Social Science Foundation, major projects of the Humanities and Social Science Key research base of the Ministry of Education, and special projects of the Ministry of Finance.