nep-bec New Economics Papers
on Business Economics
Issue of 2006‒07‒28
eight papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Consensus building: How to persuade a group By Bernard Caillaud; Jean Tirole
  2. In Search of Distress Risk By John Y. Campbell; Jens Hilscher; Jan Szilagyi
  3. Female Labor Market Transitions in Europe By Lutz C. Kaiser
  4. Head Office Employment in Canada, 1999 to 2005 By Beckstead, Desmond; Brown, W. Mark
  5. Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions By Martin Valdivia; Dean Karlan

  1. By: Bernard Caillaud; Jean Tirole
    Abstract: Many decisions in private and public organizations are made by groups. The paper explores strategies that the sponsor of a proposal may employ to convince a qualified majority of group members to approve the proposal. Adopting a mechanism design approach to communication, it emphasizes the need to distill information selectively to key members of the group and to engineer persuasion cascades in which members who are brought on board sway the opinion of others. The paper unveils the factors, such as the extent of congruence among group members and between them and the sponsor, and the size and governance of the group, that condition the sponsor's ability to maneuver and get his project approved.
    Date: 2006
  2. By: John Y. Campbell; Jens Hilscher; Jan Szilagyi
    Abstract: This paper explores the determinants of corporate failure and the pricing of financially distressed stocks using US data over the period 1963 to 2003. Firms with higher leverage, lower profitability, lower market capitalization, lower past stock returns, more volatile past stock returns, lower cash holdings, higher market-book ratios, and lower prices per share are more likely to file for bankruptcy, be delisted, or receive a D rating. When predicting failure at longer horizons, the most persistent firm characteristics, market capitalization, the market-book ratio, and equity volatility become relatively more significant. Our model captures much of the time variation in the aggregate failure rate. Since 1981, financially distressed stocks have delivered anomalously low returns. They have lower returns but much higher standard deviations, market betas, and loadings on value and small-cap risk factors than stocks with a low risk of failure. These patterns hold in all size quintiles but are particularly strong in smaller stocks. They are inconsistent with the conjecture that the value and size effects are compensation for the risk of financial distress.
    JEL: G1
    Date: 2006–07
  3. By: Lutz C. Kaiser
    Abstract: Using micro panel data, labor market transitions are analyzed for the EU-member states by cumulative year-by-year transition probabilities. As female (non-)employment patterns changed more dramatically than male employment in past decades, the analyses mainly refer to female labor supply. In search for important determinants of these transitions, six EU-countries with different labor market-regimes are selected as examples (Denmark, Germany, Netherlands, Portugal, Ireland, UK). Within these countries, women's determinants of labor market transitions are compared by means of pooled multinominal logit-regressions. The outcomes hint at both, the importance of socio-economic determinants, like the life cycle or human capital, but also address gender related differences in the paths of labor market transitions. Clearly, the observed cross-national differences are driven by specific national institutional settings. Among others, one of the most crucial features is the day-care infrastructure concerning children, which either fosters or restricts a sustainable risk management between family and work in the respective countries.
    Keywords: labor supply, labor market transitions, socio-economic determinants, institutional settings, risk management, cross-national comparison
    JEL: J21 J22 J78
    Date: 2006
  4. By: Beckstead, Desmond; Brown, W. Mark
    Abstract: This paper provides an analysis of trends in business sector head office employment in Canada from 1999 to 2005. It investigates changes in the number of head offices and head office employment over this period. The paper also examines the effect of foreign ownership on head office employment. It asks how much foreign-controlled firms contribute to Canadian head office employment and employment growth and what happens to head office employment when control of a firm changes from domestic to foreign. The paper also looks at the rate at which head offices enter and exit over time with a view to ascertaining whether the loss of a head office is a rare occurrence or a relatively common event. Finally, the paper presents trends in head office employment across metropolitan areas over the past six years.
    Keywords: Labour, Business enterprises, Employment, Business conditions
    Date: 2006–07–13
  5. By: Martin Valdivia (Grupo de Analisis para el Dessarrollo); Dean Karlan (Economic Growth Center, Yale University)
    Abstract: Can one teach entrepreneurship, or is it a fixed personal characteristic? Most academic and policy discussion on microentrepreneurs in developing countries focuses on their access to credit, and assumes their human capital to be fixed. However, a growing number of microfinance organizations are attempting to build the human capital of micro-entrepreneurs in order to improve the livelihood of their clients and help further their mission of poverty alleviation. Using a randomized control trial, we measure the marginal impact of adding business training to a Peruvian village banking program for female microentrepreneurs. Treatment groups received thirty to sixty minute entrepreneurship training sessions during their normal weekly or monthly banking meeting over a period of one to two years. Control groups remained as they were before, meeting at the same frequency but solely for making loan and savings payments. We find that the treatment led to improved business knowledge, practices and revenues. The microfinance institution also had direct benefits through higher repayment and client retention rates. Larger effects found for those that expressed less interest in training in a baseline survey have important implications for implementing similar market-based interventions with a goal of recovering costs.
    Keywords: entrepreneurship, microfinance, business training, business skills, adult education
    JEL: C93 D12 D13 D21 I21 J24 O12
  6. By: Waymond Rodgers; Susana Gago
    Abstract: This article highlights moral harassment at the workplace as a form of corruption in organizations. This form of corruption has cost organizations billions of dollars each year. A theoretical model is presented in this paper, which explains the main factors that affect bullying processes impact on organizations. Suggestions are provided in this paper, as tools to eliminate bullying within the workplace.
    Date: 2006–07
  7. By: Waymond Rodgers; Susana Gago
    Abstract: To most individuals, “trust” can be viewed as a knowledge corporate asset that may add, or rest, value to the company. The role of knowledge in achieving a competitive advantage is becoming and increasingly important management issue in all business and non-business sectors. As such, our Throughput Modeling approach indicates how six different trust behaviors can be guided, how trust decision making can be improved and made defensible, and how special problems facing individuals can be dealt with via decision-making pathways leading to an action.
    Date: 2006–07
  8. By: Waymond Rodgers; Susana Gago
    Abstract: Moral issues greet the business community constantly, confronting us with problems on handling accounting rules that can determine a company’s future. We are bombarded with news regarding fraudulent activities in companies that mishandled accounting rules leading to undermining the confidence of customers, employees, suppliers, shareholders and the community. Dealing with ethical issues is often perplexing and without the benefits of a decision making model underlined by ethical positions we may be apt to repeat our old ways. Further, value and belief systems are often times absent and not connected to a decision making model in a useful manner. We argue for a modification of decision-making models that has been accepted in companies with stronger links with ethics and morality. With this aim we propose a return to the base values of Buddhism, Christianity, Hinduism, Judaism, and Islam by scriptures, underlying six dominant ethical approaches that drive practices in organizations.
    Date: 2006–07

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