Laurent Fresard (Robert H. Smith School, University of Maryland) presenting 'Competitive Pressure and Financial Policies'. This paper examines the impact of increased product market competition on corporate investment and financing decisions. Using reductions in import tariff rates as a source of variation in competitive pressure, the authors find that firms simultaneously reduce capital and R&D investment, increase cash reserves and equity, and decrease debt in response to intensified product market competition. These adjustments are especially strong among industry followers and firms that operate at the technological core of their industry, and in more competitive markets. Also, the impact of competition turns out to be magnified when firms are exposed to greater financing risk. Overall, the results highlight that competitive pressures play a considerable role in driving the allocation of resources within firms.