Impacts of Asset Utilization, Market Competition and Market Distance on Stock Returns

Jeanne-Claire Patin (McNeese State University, Lake Charles, LA)
Matiur Rahman (McNeese State University, Lake Charles, LA)
Muhammad Mustafa (South Carolina State University, Orangeburg, SC)

JABM JOURNAL of ACCOUNTING - BUSINESS & MANAGEMENT
Vol 28 No 1 (2021): April

To empirically study the effects of asset utilization, market competition and market distance on stock returns of 1961 US public firms of different industry categories over 2001-2015. The heterogeneous panel data set consists of 23,532 (N= 1961*T= 15) observations. Pedroni’s panel co-integration, panel vector errorcorrection model (PVECM), panel dynamic OLS (PDOLS), and panel generalized method of moments (PGMM) are implemented. Both asset utilization and market competition have short-run and long-run positive effects on stock returns. But the effects of market distance are negative. The evidence for convergence toward the long-run equilibrium is very weak. Firms should be strategic to improve asset utilization, be more competitive and expand market distance to maximize stockholders’ wealth.