We examine how product similarity and competition influences mergers and acquisitions and the ability of firms to exploit product market synergies. Using novel text-based analysis of firm 10K product descriptions, we find three key results. (1) Firms are more likely to enter restructuring transactions when the language describing their assets is similar to all other firms, consistent with their...

This study examines the relationship between product differentiation and financial leverage. It argues that product differentiation is associated with investments in firm-specific assets that have lower liquidation value than general assets. Debt investors need to charge a higher interest rate to cover the risk of default, making the firm resort to equity financing and resulting in low financia...

The main objective of this paper is to introduce an Allen-type index differentiation based on cost functions. With index, we create economic measure product that quantifies differences between products. Applied research has some generally accepted measures, for example, the Herfindahl–Hirschman Index market concentration, or Gini coefficient inequality. Product differentiation, however, does no...

This paper explores tying in the situation where a multi-product firm without monopoly power competes against several single-product firms. It considers two independent markets: one for a horizontally differentiated good, the other for a homogeneous good. As opposed to the widely accepted opinion that tying may be profitable only in the case of monopoly power, it is shown that under reasonable ...

All us We study how firms differ from their competitors using new time-varying measures of product similarity based on text-based analysis of firm 10-K product descriptions. This year-by-year set of product similarity measures allows us to generate a new set of industries in which firms can have their own distinct set of competitors. Our new sets of competitors explain specific discussion of hi...