Purdue Professor Mara Faccio to present 'Political Determinants of Competition' Sept. 28

Mara FaccioMara Faccio — Hanna Chair in Entrepreneurship and professor of finance at the Purdue University Krannert School of Management, and visiting professor at the University of Chicago Booth School of Business — will deliver a lecture as part of the Mike Ilitch School of Business Finance Department Seminar Series. She will present her paper, "Political Determinants of Competition," which was co-authored with Luigi Zingales, also of the University of Chicago. 

Abstract

Do political factors affect the degree of product market competition? To explore this hypothesis we first look at the international variability in PPP-adjusted retail prices. We find a greater variability of international prices in regulated sectors (where the political influence is greater) and lower prices in more democratic countries. To probe deeper we focus on the mobile telecommunication sector. After controlling for differences in market size, we find that the degree of competition is higher in more democratic countries, especially in Scandinavian ones, and lower when the incumbent phone operators have more political connections. We also find some direct evidence of how political power affects the degree of competition through spectrum auctions and antitrust enforcement (or lack thereof). Not surprisingly, in the mobile sector more competition leads to lower prices. Yet, there is no evidence that it leads to lower quality or less investments, if anything it is the other way around. Finally, we estimate the potential welfare transfer of reduced competition. U.S. consumers would gain $72bn a year if U.S. prices were in line with Danish ones and $32bn if they were in line with German ones.

About Mara Faccio

Mara Faccio's research interest is in international finance. Her research has appeared in a variety of academic journals including the American Economic Review, the Journal of Finance, the Journal of Financial Economics, the Review of Financial Studies, the Journal of Financial and Quantitative Analysis, the Journal of Corporate Finance, and the Journal of Accounting and Economics.

Faccio’s article "The ultimate ownership of western European corporations" (with Larry H. P. Lang) received the JFE All Star Paper award (it is the most cited paper in Volume 65 of the Journal of Financial Economics and the 15th most cited JFE paper of all time based on citations per year). Her paper "Political connections and corporate bailouts" (with John J. McConnell, and Ronald W. Masulis) was nominated for the Brattle Prize (which is awarded to the best corporate finance paper published in the Journal of Finance). Her paper “Large shareholder diversification and corporate risk-taking” (with Maria-Teresa Marchica and Roberto Mura) was the Best Paper Runner Up for the BlackRock/Brennan Award (Review of Financial Studies). Her paper “Taxes and capital structure” (with Jin Xu) recently won the William F. Sharpe Award for Scholarship in Financial Research, recognizing the best paper in the 2015 volume of the Journal of Financial and Quantitative Analysis.

Faccio is a senior fellow of the Asian Bureau of Finance and Economics Research, a research fellow of the Centre for Economic Policy Research and a research associate of the European Corporate Governance Institute. She is currently Hanna Chair in Entrepreneurship & Professor of Management (Finance) at Purdue University, Krannert School of Management. Prior to joining the Krannert faculty in 2007, Faccio was a faculty member at Vanderbilt University (2003-2007), the University of Notre Dame (2001-2003), and Università Cattolica, Milan (1999-2001). Faccio earned a Ph.D. in finance from Universita' Cattolica (Milan), an MPhil from City University Business School (London), and both a master’s degree and a bachelor’s degree from Universita' di Pavia (Italy). Faccio is an avid golfer and a big fan of Italian soccer team Juventus.