Research

Selected working papers

Predatory Advertising, Financial Fraud, and Leverage (with Shantanu Banerjee, Sudipto Dasgupta, and Rui Shi)

• UNSW, University of Amsterdam, Shanghai Advanced Insititute of Finance, Bristol University ...

• Abstract: We examine how an industry leader’s competitors respond when financial fraud by the leader is publicly revealed. We document evidence of predatory advertising and pricing. Close competitors of the leader step up advertisement spending relative to control firms. Although we do not directly observe product prices, we find that even though advertisement increases, competitors’ profit margins drop, consistent with predatory pricing. Evidence of predation is stronger when rival firms have larger market share, the fraud firm has higher leverage, and when the average leverage of rival firms is lower. The effects appear mainly in industries that produce customized products and where consumer switching costs are high. Increasing advertising expenditure appears to be a more potent predatory strategy in industries that experience new customer growth, whereas cutting prices appears more potent in industries with stagnant customer base. We present a switching cost model similar to Klemperer (1995) that generates implications broadly consistent with these observations.

Other Publications

• COVID-19 and The Corporate Sector: Winners, Losers, and What Lies Ahead (with Sudipto Dasgupta, Subrata Sarkar, and Jayati Sarkar) 

  • Book Chapter in The Impact of COVID-19 on India and the Global Order, Springer Nature, 2022.

• NAV inflation and impact on performance in China (with Mark Shackleton and Chelsea Yao), 2020, European Financial Management, 26 (1),  118-142.

  • Combined from Jiali's Master of Research Dissertation