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The Business Strategy, Competitive Advantage and Financial Strategy: A Perspective from Corporate Maturity Mismatched Investment.

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    • 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. [ABSTRACT FROM AUTHOR]
    • Abstract:
      Copyright of Journal of Competitiveness is the property of Tomas Bata University in Zlin, Faculty of Management & Economics and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)