Market power and firm-level stability: the role of corporate financial policies

Abstract The study examines the moderating role of corporate financial policies (short-term financial decision, long-term financial decision, dividend policy) in the relationship between market power and firm-level stability, as well as how market power and corporate financial policies individually influence firm-level stability. We used a panel dataset of 231 companies across 12 countries in the Sub-Saharan African region. Employing two-step system GMM, the findings reveal that market power, short-term financial decisions, and long-term financial decision significantly impact firm-level stability. Whereas market power and short-term financial decisions impact firm-level stability positively, long-term financial decision has a negative relationship with firm-level stability. It was further observed that short-term financial decision and long-term financial decision significantly moderate the relationship between market power and firm-level stability. Following the findings, managers are advised to carefully ensure that financing decisions are aligned with their companies’ levels of market power.