Competing in Four Markets

In this paper, I propose an extended model of competition that integrates four distinct markets in which firms compete: the product market, factor market, market for corporate control, and reputation market. I then examine the interrelationships among these markets by applying a panel vector autoregression (PVAR) model to an 11-year panel dataset comprising over 1,700 publicly listed U.S. firms from 2006 to 2016. The empirical results show that a positive (or negative) performance shock in one market generally leads to a long-lasting positive (or negative) effect in the other markets. The magnitude and duration of these effects vary depending on the specific market pairs. Notably, shocks in the reputation market—measured by ESG performance—exert a particularly persistent influence on the other three markets.