nep-bec New Economics Papers
on Business Economics
Issue of 2012‒04‒23
seventeen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Do Women Top Managers Help Women Advance? A Panel Study Using EEO-1 Records By Kurtulus, Fidan Ana; Tomaskovic-Devey, Donald
  2. Cyclical changes in firm volatility By Emmanuel De Veirman; Andrew Levin
  3. Cyclical Labour Market Adjustment in New Zealand: The Response of Firms to the Global Financial Crisis and its Implications for Workers By Fabling, Richard; Maré, David. C
  4. Intra-Firm Trade and Employment in US Manufacturing By Sotiris Blanas
  5. An empirical analysis of factors related to auditor switching after corporate takeovers By Luypaert, Mathieu; Van Caneghem, Tom
  6. Delegation and Limited Liability in a Modern Capitalistic Economy By Tetsuya Shinkai; Takao Ohkawa; Makoto Okamura; Kozo Harimaya
  7. Wage Discrimination over the Business Cycle By Biddle, Jeff E.; Hamermesh, Daniel S.
  8. The Role of Performance Appraisals in Motivating Employees By Jurjen J.A. Kamphorst; Otto H. Swank
  9. Informing Consumers about their own Preferences By Peitz, Martin; Inderst, Roman
  10. Foreign acquisition and the performance of New Zealand firms By Richard Fabling; Lynda Sanderson
  11. The interaction of explicit and implicit contracts: A signaling approach By Gürtler, Marc; Gürtler, Oliver
  12. Quitting and Peer Effects at Work By Rosaz, Julie; Slonim, Robert; Villeval, Marie Claire
  13. The impact of outward FDI on the domestic perimeter of manufacturing groups By Alexandre Gazaniol
  14. Explicit versus Implicit Contracts for Dividing the Benefits of Cooperation By Marco Casari; Timothy N. Cason
  15. Too Much Information Sharing? Welfare Effects of Sharing Acquired Cost Information in Oligopoly By Juan-José Ganuza; Jos Jansen
  16. Interpretive structural modeling of supply chain risks By Pfohl, Hans-Christian; Gallus, Philipp; Thomas, David
  17. The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data By Gautier, E.; Le Saout, R.

  1. By: Kurtulus, Fidan Ana (University of Massachusetts Amherst); Tomaskovic-Devey, Donald (North Carolina State University)
    Abstract: The goal of this study is to examine whether women in the highest levels of firms' management ranks help reduce barriers to women's advancement in the workplace. Using a panel of over 20,000 private-sector firms across all industries and states during 1990-2003 from the U.S. Equal Employment Opportunity Commission, we explore the influence of women in top management on subsequent female representation in lower-level managerial positions in U.S. firms. Our key findings show that an increase in the share of female top managers is associated with subsequent increases in the share of women in mid-level management positions within firms, and this result is robust to controlling for firm size, workforce composition, federal contractor status, firm fixed effects, year fixed effects and industry-specific trends. Moreover, although the influence of women in top management positions is strongest among white women, black, Hispanic and Asian women in top management also have a positive influence on subsequent increases in black, Hispanic and Asian women in mid-level management, respectively. Furthermore, the influence of women in top management positions is stronger among federal contractors, and in firms with larger female labor forces. We also find that the positive influence of women in top leadership positions on managerial gender diversity diminishes over time, suggesting that women at the top play a positive but transitory role in women's career advancement.
    Keywords: women managers, gender diversity, race diversity, discrimination, mentoring, promotions, hiring, retention
    JEL: J16 J21 J24 J44 J62 J71 J78 J82 M51
    Date: 2012–03
  2. By: Emmanuel De Veirman; Andrew Levin (Reserve Bank of New Zealand)
    Abstract: We estimate changes in the volatility of firm-level sales, earnings and employment growth of US firms. Our method differs from existing measures for firm-level sales and employment volatility in that it not only captures longer-run changes in volatility, but also measures cyclical changes in firm volatility. We detect substantial cyclical variation in firm-specific volatility around trend. Firm-specific volatility was low in the early 1990s, rose in the mid- and late-1990s, and was high around 2000. Our results are consistent with the hypothesis, deduced from models with financial frictions, that rising idiosyncratic volatility before 2001 contributed to the coincident rise in the external finance premium and to the 2001 recession. Endogenous pricing models imply that price adjustment is less frequent, and disinflation more costly, when firm-specific volatility is low. Consistent with endogenous pricing models, we find that the output cost of disinflation was three times larger in the early 1990s than in the early 2000s.
    JEL: C33 D22 E31 E32
    Date: 2011–11
  3. By: Fabling, Richard (Motu Economic and Public Policy Research); Maré, David. C (Motu Economic and Public Policy Research)
    Abstract: This paper examines the dynamics of employment adjustment in New Zealand, focusing on the response of firms to the 2008/09 Global Financial Crisis. We use data from Statistics New Zealand’s prototype Longitudinal Business Database (LBD) to examine firms’ employment responses to output shocks before and after the crisis, and to investigate variations in job and worker flows. We discuss the resilience of the NZ labour market to economic shocks, and the possible role of labour market policy settings. Finally, we discuss preliminary findings on the differential impact of labour market adjustment on workers – by earnings level, age, gender, and tenure – and outline potential further work along these lines. Our analysis of firm microdata highlights three key features of New Zealand labour market adjustment to the 2008/09 crisis. First, there was considerable heterogeneity across firms, both before and after the crisis, in the size of output shocks that firms faced, the amount of employment adjustment in response to any given output shock, and in the size of worker flows given the firm’s employment adjustment. Second, the crisis not only moved the distribution of output shocks faced by firms, but also altered the relationship between output shocks and changes in job and worker flows and employment. Third, the impact of the observed firm-level dynamics had an uneven impact on workers, with greater employment losses for low wage workers, young workers, and workers with low job tenure.
    Keywords: Global Financial Crisis; labour market adjustment; output shock; unemployment; job flows; worker flows
    JEL: E24 E32 J63
    Date: 2012–04
  4. By: Sotiris Blanas
    Abstract: This paper studies the impact of trade within US-headquartered multinational companies (MNCs) on labour demand for all employees, as well as, for those of high and low skill in US manufacturing for the period 1995 – 2005. We find strong evidence on the positive and negative effect of intra-firm exports and imports respectively, on aggregate employment. The former effect is stronger than the latter. Moreover, we find that demand for low-skilled labour is negatively associated with intra-firm imports, while unaffected by intra-firm exports. In contrast, high-skilled labour demand is positively linked to intra-firm exports but unaffected by intra-firm imports. The last two findings put together, suggest that low-skill intensive stages of the value-added chain are mostly transferred to the US affiliates abroad, while highskill intensive ones are mostly kept within the US parents
    Keywords: Multinational Companies (MNCs); intra-firm imports; intra-firm exports; employment; low-skilled workers; high-skilled workers
    JEL: F16 F23 J21 J23
    Date: 2012–03
  5. By: Luypaert, Mathieu (Vlerick Leuven Gent Management School en KU Leuven); Van Caneghem, Tom (Hogeschool-Universiteit Brussel (HUB))
    Abstract: In case of a takeover, the acquiring firm has to choose whether to retain the acquired firm’s incumbent auditor or to switch to its own auditor. In the current paper, we explore the drivers of auditor switching by the acquired firm after a takeover among a sample of Belgian takeovers. Employing binary probit regression analysis, we relate different types of variables borrowed from the auditing literature (e.g., similarity of activities between the acquired and the acquiring firm, auditor size, type of audit opinion, agency variables) to the auditor change decision. Our results confirm prior evidence indicating that the majority of acquired firms switch to the auditor of the acquiring firm after the takeover. Whereas prior results are inconclusive, our results suggest that similarity of activities between the acquired and the acquiring firm does not affect the decision to replace the acquired firm’s auditor. However, our results indicate that the likelihood of an auditor switch is significantly higher when the acquiring firm is listed. Agency variables (at both the acquired and the acquiring firm level) are also found to affect the auditor change decision.
    Keywords: takeover, auditor switch, auditor choice, agency costs
    Date: 2012–01
  6. By: Tetsuya Shinkai (School of Economics, Kwansei Gakuin University); Takao Ohkawa (Faculty of Economics, Ritsumeikan University); Makoto Okamura (Economics Department, Ritsumeikan University and Hiroshima University); Kozo Harimaya (Faculty of Business Administration, Ritsumeikan University)
    Abstract: We examine an effect of limited liability on strategic delegation in a Cournot duopoly with demand uncertainty. We establish that owners of each firm always delegate their tasks, decisions, and responsibility to a manager under limited liability, while they do not always do so under unlimited liability. This result is consistent with the fact that separation of ownership and management as well as limited liability prevail in many modern large companies.
    Keywords: limited liability, delegation, managerial incentives, and Cournot duopoly
    JEL: G32 L13 L12
    Date: 2012–04
  7. By: Biddle, Jeff E. (Michigan State University); Hamermesh, Daniel S. (University of Texas at Austin)
    Abstract: Using CPS data from 1979-2009 we examine how cyclical downturns and industry-specific demand shocks affect wage differentials between white non-Hispanic men and women, Hispanics and non-Hispanic whites, and African-Americans and non-Hispanic whites. Women's relative earnings are harmed by negative shocks; the wage disadvantage of African-Americans drops with negative shocks, which have slight negative effects on Hispanics' relative wages. Negative shocks also increase the earnings disadvantage of bad-looking workers. A theory of job search suggests two opposite-signed mechanisms that affect these wage differentials. It suggests greater absolute effects among job-movers, which is verified using the longitudinal component of the CPS.
    Keywords: gender, race, ethnicity
    JEL: E29 J71
    Date: 2012–03
  8. By: Jurjen J.A. Kamphorst (Erasmus University Rotterdam); Otto H. Swank (Erasmus University Rotterdam)
    Abstract: In many organizations, reward decisions depend on subjective performance evaluations. However, evaluating an employee's performance is often difficult. In this paper, we develop a model in which the employee is uncertain about his own performance and about the manager's ability to assess him. The manager gives an employee a performance appraisal with a view of affecting the employee's self perception, and the employee's perception of the manager's ability to assess performance. We examine how performance appraisals affect the employee's future performance. The predictions of our model are consistent with various empirical findings. These comprise (i) the observation that managers tend to give positive appraisals, (ii) the finding that on average positive appraisals motivate more than negative appraisals, and (iii) the observation that the effects of appraisals depend on the employee's perception of the manager's ability to assess performance accurately.
    Keywords: Subjective Performance Appraisal; Credibility; Cheap Talk
    JEL: M52 M54 D82 D83
    Date: 2012–04–10
  9. By: Peitz, Martin; Inderst, Roman
    Abstract: We analyze a model of monopolistic price discrimination where only some consumers are originally sufficiently informed about their preferences, e.g., about their future demand for a utility such as electricity or telecommunication. When more consumers become informed, we show that this benefits also those consumers who remain uninformed, as it reduces the firm’s incentives to extract information rent. By reducing the costs of information acquisition or forcing firms to supply consumers with the respective information about past usage, policy can further improve welfare, as contracts become more efficient. The last observation stands in contrast to earlier findings by Crémer and Khalil (American Economic Review 1992), where all consumers are uninformed.
    Keywords: Nonlinear pricing , price discrimination , monopolistic screening , information acquisition
    JEL: D42 D82 L12
    Date: 2012
  10. By: Richard Fabling; Lynda Sanderson (Reserve Bank of New Zealand)
    Abstract: This paper examines the firm-level determinants of foreign acquisitions of New Zealand companies, and the consequences for both the purchased firms and the workers within those firms. We follow a combined propensity score matching and difference-in-differences approach to identify and address endogenous selection of acquisition targets. The results suggest that foreign firms tend to target high-performing New Zealand companies. Acquired firms then exhibit higher growth in average wages and output, relative to similar domestic firms, but do not appear in general to increase their productivity or capital intensity. We find no evidence of differential survival rates for recently acquired foreign firms.
    JEL: D22 F23
    Date: 2011–12
  11. By: Gürtler, Marc; Gürtler, Oliver
    Abstract: We analyze the interaction of explicit and implicit contracts in a model with selfish and fair principals. Fair principals are willing to honor implicit agreements, whereas selfish principals are not. Principals are privately informed about their types. We investigate a separating equilibrium in which principals reveal their type through the contract o er to the agent. If this equilibrium is played, explicit and implicit contracts are substitutes. Since the agent learns the principal's type, a selfish principal has to rely on explicit incentives. A fair principal, by contrast, can effectively induce implicit incentives and hence does not need to use explicit incentives. Interestingly, if a selfish principal can rely on more effective explicit incentives, a fair principal becomes more likely to be able to separate from the selfish type and, hence, to make better use of implicit incentives. In this sense, there is a strategic complementarity between explicit and implicit incentives. --
    Keywords: explicit contracts,implicit contracts,separating equilibrium,substitutes,strategic,complementarity
    JEL: D82 D86 M52
    Date: 2012
  12. By: Rosaz, Julie (University of Montpellier 1); Slonim, Robert (University of Sydney); Villeval, Marie Claire (CNRS, GATE)
    Abstract: While peer effects have been shown to affect worker's productivity when workers are paid a fixed wage, there is little evidence on their influence on quitting decisions. This paper presents results from an experiment in which participants receive a piece-rate wage to perform a real-effort task. After completing a compulsory work period, the participants have the option at any time to continue working or quit. To study peer effects, we randomly assign participants to work alone or have one other worker in the room with them. When a peer is present, we manipulate the environment by giving either vague or precise feedback on the co-worker's output, and also vary whether the two workers can communicate. We find that allowing individuals to work with a co-worker present does not increase worker's productivity. However, the presence of a peer in all working conditions causes workers to quit at more similar times. When, and only when, communication is allowed, workers are significantly more likely to (1) stay longer if their partner is still working, and (2) work longer the more productive they are. We conclude that when workers receive a piece-rate wage, critical peer effects occur only when workers can communicate with each other.
    Keywords: quits, peer effects, communication, feedback, experiment
    JEL: C91 D83 J63 J28 J81
    Date: 2012–04
  13. By: Alexandre Gazaniol (Université Paris Dauphine, LEDa UMR 225 DIAL, IRD)
    Abstract: (english) This article aims to analyze the structure and the performance of multinational firms at the group level, and to estimate the impact of outward FDI on the domestic perimeter of manufacturing groups. This empirical work anticipates a major reshape of business statistics, which does not consider Legal Entities (LEs) as the relevant unit for economic analysis. In order to construct new statistical units which enjoy some degrees of autonomy, we use a French dataset (“LiFi”) which allows gathering all French LEs which belong to the same group. We show that nearly all multinational firms in the French manufacturing sector are organized around several LEs and we describe the implications of this organizational choice in terms of market structure and performance. Following firms which invest abroad for the first time reveals that outward FDI has a positive effect on the whole domestic perimeter of groups, since value-added, employment and exports significantly increase ex-post. The growth of employment is especially high in companies dedicated to auxiliary functions so the share of employees in the manufacturing perimeter tends to decrease after the investment. _________________________________ (français) Cet article vise à analyser la structure et les performances des firmes multinationales au niveau des groupes de sociétés, et à estimer l’impact des IDE sortants sur le périmètre domestique des groupes industriels. Il s’inscrit dans une refonte des statistiques d’entreprises, qui vise à dépasser le niveau des entités juridiques pour adopter une définition économique de l’entreprise, tenant compte de son degré d’autonomie. Afin de construire de nouvelles unités statistiques jouissant d’une autonomie de décision, nous utilisons l’enquête LiFi, qui nous permet de rassembler les sociétés françaises appartenant à un même groupe. Nous montrons que presque toutes les firmes multinationales dans l’industrie manufacturière française s’organisent autour de plusieurs entités juridiques et nous décrivons les implications de ce choix organisationnel en termes de structure de marché et de performances. L’analyse en dynamique des firmes qui investissent à l’étranger pour la première fois révèle que les IDE sortants ont un impact positif sur l’ensemble du périmètre domestique des groupes, dont la valeur ajoutée, l’emploi et les exportations augmentent significativement ex-post. La croissance de l’emploi apparaît plus soutenue dans les sociétés dédiées aux fonctions en support de la production, ce qui suggère que les IDE sortants contribuent à la désindustrialisation des pays développés.
    Keywords: Multinational firms, business groups, profiling, FDI, relocations, firms performance, deindustrialization, skill upgrading.
    JEL: D22 F23 L22
    Date: 2012–04
  14. By: Marco Casari; Timothy N. Cason
    Abstract: Experimental evidence has accumulated highlighting the limitations of formal and explicit contracts in certain situations, and has identified environments in which informal and implicit contracts are more efficient. This paper documents the superior performance of explicit over implicit contracts in a new partnership environment in which both contracting parties must incur effort to generate a joint surplus, and one (“strong”) agent controls the surplus division. In the treatment in which the strong agent makes a non-binding, cheap talk “bonus” offer to the weak agent, this unenforceable promise doubles the rate of joint high effort compared to a baseline with no promise. The strong agents most frequently offered to split the gains of the high effort equally, but actually delivered this amount only about onequarter of the time. An explicit and enforceable contract offer performs substantially better, increasing the frequency of the most efficient outcome by over 200 percent relative to the baseline.
    Keywords: Experiments; laboratory; social preferences; inequity aversion; reciprocity; trust.
    JEL: C70 D03
    Date: 2012–04
  15. By: Juan-José Ganuza; Jos Jansen
    Abstract: By using general information structures and precision criteria based on the dispersion of conditional expectations, we study how oligopolists' information acquisition decisions may change the effects of information sharing on the consumer surplus. Sharing information about individual cost parameters gives the following trade-off in Cournot oligopoly. On the one hand, it decreases the expected consumer surplus for a given information precision, as the literature shows. On the other hand, information sharing increases the firms' incentives to acquire information, and the consumer surplus increases in the precision of the firms' information. Interestingly, the latter effect may dominate the former effect.
    Keywords: Information acquisition, information sharing, information structures, oligopoly, consumer surplus
    JEL: D82 D83 L13 L40
    Date: 2012–04–18
  16. By: Pfohl, Hans-Christian; Gallus, Philipp; Thomas, David
    Date: 2011–10–10
  17. By: Gautier, E.; Le Saout, R.
    Abstract: Using millions of individual gasoline prices collected at a daily frequency, we examine the speed at which market refined oil prices are transmitted to consumer liquid fuel prices. We find that on average gasoline prices are modified once a week and the distribution of price changes displays a M-shape as predicted by a menu-cost model. Using a reduced form state-dependent pricing model with time-varying random thresholds, we find that the degree of pass through of wholesale prices to retail gasoline prices is on average 0.77 for diesel and 0.67 for petrol. The duration for a shock to be fully transmitted into prices is about 10 days. There is no significant asymmetry in the transmission of wholesale price to retail prices.
    Keywords: price stickiness, menu costs, (S,s) models, gasoline price.
    JEL: E31 D43 L11
    Date: 2012

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