| Capital market pressure, especially the pressure to meet analysts' consensus forecast, is an important issue for managers of public firms. However, despite numerous news stories and scholarly articles that this pressure affects firms' strategic behavior and performance, direct empirical evidence is lacking on whether and how earnings pressure changes firms' strategic actions, especially in the context of oligopolistic competition. In an oligopolistic competitive context, competitive actions designed to increase short-term earnings may have adverse effects on long-term competitive positions and performance because of the competitive reactions from rivals. Therefore, these important questions merit further study.;In this dissertation, I try to answer these questions by developing a theoretical framework and conducting three closely related empirical studies. The framework provides predictions about the impact of earnings pressure on a firm's competitive behavior in an oligopolistic context, and draws performance implications for both the firm and its rivals. I transformed these propositions into testable hypotheses and examined them in three empirical studies in different contexts: (1) Two single industry studies examining oligopolistic competition under strategic substitutes (output competition in the U.S. electricity industry) and strategic complements (price competition in the U.S. airline industry); (2) A cross-industry event study exploring the competitive and performance implications of earnings pressure by analyzing how a firm's decisions to go private (which removes earnings pressure) affects their competitors' stock market performance.;The findings show that a firm under earnings pressure reduces competitive aggressiveness in product market competition and competitors increase their aggressiveness, suggesting negative performance consequence of earnings pressure. The results also highlight the important role of competitive factors such as market structure and organizational factors such as ownership structure and accounting flexibility. |
