The Business Strategy, Competitive Advantage and Financial Strategy: A Perspective from Corporate Maturity Mismatched Investment
Can Wang, Tomas Brabenec, Peng Gao, Ziyu Tang
Keywords:
business strateg y, competitive advantage, corporate financial strateg y, financial risk, maturity
mismatch
Abstract:
Competitive advantage is the key to a company’s success, and the business strategy represents a
long-term plan to achieve a competitive advantage by affecting the company’s financial behavior.
This research studies the interaction of business strategy, competitive advantage, and financial
strategy to explore whether companies choose different financial strategies based on their
business strategies as well as what role competitive advantage plays in their decision-making.
By building a composite index and observing maturity mismatched investment, this research
quantifies the risk level of business strategies and financial strategies. Using text analysis of
a company’s annual report, the research builds a dummy variable to measure the competitive
advantage. Based on the samples of A-shares listed on the China Shanghai and Shenzhen stock
exchanges from 2007 to 2016, the research shows that the risk level of business strategy and
financial strategy tends to move in opposite directions. If a company embraces an aggressive
business strategy, it is more likely to choose a conservative financial approach in terms of lower
overall risks, but for the company with a competitive advantage, the negative correlation between
these two strategies is weakened. Further analysis found that company ownership, free cash flow,
and the quality of internal control also play a significant role in the interaction between business
strategy and financial strategy. Our findings not only enrich research on business strategy and
financial behavior, but also deepen the understanding of competitive advantage and corporate
financial strategy theoretically.
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 The Business Strategy, Competitive Advantage and Financial Strategy: A Perspective from Corporate Maturity Mismatched Investment [PDF file] [Filesize: 1.08 MB]
 10.7441/joc.2021.01.10
Wang, C., Brabenec, T., Gao, P., & Tang, Z. (2021). The Business Strategy, Competitive Advantage
and Financial Strategy: A Perspective from Corporate Maturity Mismatched Investment. Journal of
Competitiveness, 13(1), 164–181. https://doi.org/10.7441/joc.2021.01.10
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