nep-bec New Economics Papers
on Business Economics
Issue of 2013‒04‒06
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Management-Employee Relations, Firm Size and Job Satisfaction By Tansel, Aysit; Gazioglu, Saziye
  2. Industry Window Dressing By Huaizhi Chen; Lauren Cohen; Dong Lou
  3. Service deregulation, competition and the performance of French and Italian firms By Francesco Daveri; Rèmy Lecat; Maria Laura Parisi
  4. Political limits on the world oil trade : firm-level evidence from US firms By Kashcheeva, Mila
  5. Modelling Volatility Size Effects for Firm Performance: The Impact of Chinese Tourists to Taiwan By Chang, Chia-Lin; Hsu, Hui-Kuang
  6. Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters By Yue Ma; Heiwai Tang; Yifan Zhang
  7. Production Hierarchies in Sweden By Tåg, Joacim
  8. Team Heterogeneity in Startups and its Development over Time By Kaiser, Ulrich; Müller, Bettina
  9. Strategic real options with stochastic volatility in a duopoly model By Huang, Bing; Cao, Jiling; Chung, Hyuck
  10. Why is Exporting Hard in Some Sectors? By Anders AKERMAN; Rikard FORSLID; OKUBO Toshihiro
  11. Director Shareownership and Corporate Performance in South Africa By Ntim, Collins G
  12. Uncertainty, expectations, and the business cycle. By LANG, Jan Hannes

  1. By: Tansel, Aysit (Middle East Technical University); Gazioglu, Saziye (Middle East Technical University)
    Abstract: This paper investigates the job satisfaction in relation to managerial attitudes towards employees and firm size using the linked employer-employee survey results in Britain. We first investigate the management-employee relationships and the firm size using maximum likelihood probit estimation. Next various measures of job satisfaction are related to the management-employee relations via maximum likelihood ordered probit estimates. Four measures of job satisfaction that have not been used often are considered. They are satisfaction with influence over job; satisfaction with amount of pay; satisfaction with sense of achievement and satisfaction with respect from supervisors. Main findings indicate that management-employee relationships are less satisfactory in the large firms than in the small firms. Job satisfaction levels are lower in large firms. Less satisfactory management-employee relationships in the large firms may be a major source of the observed lower level of job satisfaction in them. These results have important policy implications from the point of view of the firm management while achieving the aims of their organizations in particular in the large firms in the area of management-employee relationships. Improving the management-employee relations in large firms will increase employee satisfaction in many respects as well as increase productivity and reduce turnover. The nature of the management-employee relations with firm size and job satisfaction has not been investigated before.
    Keywords: job satisfaction, managerial attitudes, firm size, linked employer-employee data, Britain
    JEL: J28 J5 J21 D23
    Date: 2013–03
  2. By: Huaizhi Chen; Lauren Cohen; Dong Lou
    Abstract: We explore a new mechanism through which investors take correlated shortcuts. Specifically, we exploit a regulatory provision governing firm classification into industries: A firm’s industry classification is determined by the segment that has the majority of sales. We find strong evidence that investors overly rely on this primary industry classification. Firms just above the industry classification cutoff have significantly higher betas with respect to, as well as more sector mutual fund holdings and analyst coverage from, that industry, compared to nearly identical firms just below the cutoff. We then show that managers undertake specific actions to exploit investor shortcuts. Firms around the discontinuity point of 50% sales are significantly more likely to have just over 50% of sales from a “favorable” industry. Further, these firms just over the cutoff have significantly lower profit margins and inventory growth compared to other firms in the same industries, consistent with these firms slashing prices to increase sales. These same firms, however, do not exhibit different behaviors in any other aspect of their business (e.g., CapEx or R&D), suggesting that it is not a firm-wide shift of focus. Last, firms garner tangible benefits from switching into favorable industries, such as engaging in significantly more SEOs and stock-financed M&As.
  3. By: Francesco Daveri; Rèmy Lecat; Maria Laura Parisi
    Abstract: We use firm-level data for France and Italy to explore the impact of service regulation reform implemented in the two countries on the mark-up and eventually on the performance of firms between the second half of the 1990s and 2007. We find that the relation between entry barriers and productivity is negative and is crucially intermediated through the firm’s mark up. If both countries adopted OECD’s best practices in terms of entry barriers, their TFP level would increase by 3% for Italy and 3.5% for France.
    Keywords: Regulation, services, performance, TFP
    JEL: D24 K20 L51 O40 O57
    Date: 2013–03
  4. By: Kashcheeva, Mila
    Abstract: International politics affect trade patterns, especially for firms in extractive industries. We construct the firm-level dataset for the U.S. oil-importing companies over 1986-2010 to test whether the state of international relations with the trading partners of the U.S. affect importing behavior of the U.S. firms. To measure "political distance" between the U.S. and her trading partners we use voting records for the UN General Assembly. We find that the U.S. firms, in fact, import significantly less oil from the political opponents of the U.S. Our conjecture is that the decrease in oil imports is mainly driven by large, vertically-integrated U.S. firms that engage in foreign direct investment (FDI) overseas.
    Keywords: United States, Petroleum, International trade, Petroleum industry, International relations, Oil imports, Political distance, FDI
    JEL: F14 F51 Q34
    Date: 2013–03
  5. By: Chang, Chia-Lin; Hsu, Hui-Kuang
    Abstract: This paper investigates the volatility size effects for firm performance in the Taiwan tourism industry, especially the impacts arising from the tourism policy reform that allowed mainland Chinese tourists to travel to Taiwan. Four conditional univariate GARCH models are used to estimate the volatility in the stock indexes for large and small firms in Taiwan. Daily data from 30 November 2001 to 27 February 2013 are used, which covers the period of Cross-Straits tension between China and Taiwan. The full sample period is divided into two subsamples, namely prior to and after the policy reform that encouraged Chinese tourists to Taiwan. The empirical findings confirm that there have been important changes in the volatility size effects for firm performance, regardless of firm size and estimation period. Furthermore, the risk premium reveals insignificant estimates in both time periods, while asymmetric effects are found to exist only for large firms after the policy reform. The empirical findings should be useful for financial managers and policy analysts as it provides insight into the magnitude of the volatility size effects for firm performance, how it can vary with firm size, the impacts arising from the industry policy reform, and how firm size is related to financial risk management strategy.
    Keywords: Tourism, firm size, conditional volatility models, volatility size effects, asymmetry, tourism policy reform.
    JEL: C22 C32 G18 L83
    Date: 2013–03–31
  6. By: Yue Ma (Lingnan University and Hong Kong Institute for Monetary Research); Heiwai Tang (Tufts University and Hong Kong Institute for Monetary Research); Yifan Zhang (Lingnan University)
    Abstract: Using Chinese manufacturing firm data over the period of 1998-2007, we find that firms become less capital-intensive after exporting, compared to similar non-exporting firms. To rationalize this finding that contrasts with existing evidence for most countries, we develop a variant of the multi-product model of Bernard, Redding, and Schott (2010) to consider products with varying capital intensity. In the model, firms in a labor-abundant country specialize in their core competency by allocating more resources to produce labor-intensive products after exporting. Consistent with the model predictions, we find evidence that the ex-ante more productive firms experience a smaller decline in capital intensity after exporting, but firms that experience a sharper decline in capital intensity after exporting have a larger increase in measured total factor productivity. Using transaction-level data, we confirm that Chinese exporters add new products that are less capital-intensive than their existing product portfolios and drop those that are more capital-intensive over time.
    Keywords: Exporters, Productivity, Factor Intensity, Multi-product Firms
    JEL: F11 L16 O53
    Date: 2012–10
  7. By: Tåg, Joacim (Research Institute of Industrial Economics (IFN))
    Abstract: I study the internal organization of firms using occupation data on workers in Swedish manufacturing firms. Firms with more layers are larger in size, in value added, and they pay higher wages. Firms are hierarchal in that lower layers have more workers and lower mean wage than higher layers. Adding layers is associated with increases in mean firm size/value added and decreases in mean firm wages (at pre-existing layers). The reverse holds for removing layers. This result also holds for layer by layer mean size and wages for a majority of pre-existing layers.
    Keywords: Hierarchies; Organizations; Occupations; Wages; Productivity
    JEL: D22 D24 J31
    Date: 2013–03–19
  8. By: Kaiser, Ulrich (University of Zurich); Müller, Bettina (ZEW Mannheim)
    Abstract: We investigate the workforce heterogeneity of startups with respect to education, age and wages. Our explorative study uses data on the population of 1,614 Danish firms founded in 1998. We track these firms until 2001 which enables us to analyze changes in workforce composition over time. Such a dynamic analysis constitutes a hitherto neglected area of entrepreneurship research. To assess relative workforce heterogeneity, we construct a simulated benchmark to which we compare observed workforce heterogeneity. We find that the initial workforce is relatively homogeneous compared to our benchmark. Our result holds both for non-knowledge-based and, to a lesser extent, knowledge-based startups. This seems surprising since a vast management literature advocates heterogeneous teams. The difficulties associated with workforce heterogeneity (like affective conflict or coordination cost) as well as "homophily" (people's inclination to bound with others with similar characteristics) hence appear to generally overweigh the benefits of heterogeneity (like greater variety in perspectives or more creativity). We also document that workforces become more heterogeneous over time – startups add workers with skills different from the workforce at startup. The initial supposedly "poor" mix of workforce characteristics is hence adjusted as the startup matures. This increase in workforce heterogeneity is, however, smaller compared to our benchmark but substantially larger than is team additions had the same characteristics as the initial team members.
    Keywords: entrepreneurship, start-ups, skill heterogeneity, team dynamics
    JEL: C10 L26 M13
    Date: 2013–03
  9. By: Huang, Bing; Cao, Jiling; Chung, Hyuck
    Abstract: The investment-timing problem has been considered by many authors under the assumption that the instantaneous volatility of the demand shock is constant. Recently, Ting et al. [9] carried out an asymptotic approach in a monopoly model by letting the volatility parameter follow a stochastic process. In this paper, we consider a strategic game in which two firms compete for a new market under an uncertain demand, and extend the analysis of Ting et al. to duopoly models under different strategic game structures. In particular, we investigate how the additional uncertainty in the volatility affects the investment thresholds and payoffs of players. Several numerical examples and comparison of the results are provided to confirm our analysis.
    Keywords: Asymptotic solution, Real option, Stochastic duopoly game, Stochastic volatility.
    JEL: C61 C73
    Date: 2013–03–18
  10. By: Anders AKERMAN; Rikard FORSLID; OKUBO Toshihiro
    Abstract: This paper models the market entry cost of exporters as dependent on the size of the export market as well as on sector specific factors. We introduce these features in a Melitz trade model with heterogeneous firms. The predictions of our model are tested using Swedish and Japanese firm level data. We find that sector level advertising or sales promotion intensity is an important component of the market entry cost. A larger market size, if anything, lowers entry costs.
    Date: 2013–03
  11. By: Ntim, Collins G
    Abstract: This paper investigates the relationship between director shareownership and corporate performance in South Africa using a sample of 169 listed firms from 2002 to 2007. Our results suggest a statistically significant and positive association between director shareownership and corporate performance. By contrast, we find no evidence of a non-linear effect of director shareownership on corporate performance. Our findings are robust across a raft of econometric models that control for different types of endogeneity problems and corporate performance proxies. Overall, our results provide support for agency theory, which suggests that director shareownership can reduce agency problems by aligning more closely the interests of shareholders and corporate executives, and thereby improving corporate performance.
    Keywords: corporate governance, corporate performance, director shareownership, South Africa, endogeneity
    JEL: G32 G34 G38
    Date: 2012–12–29
  12. By: LANG, Jan Hannes
    Abstract: This thesis adds to the recent quantitative literature that considers variations in uncertainty as impulses driving the business cycle. In chapter one a flexible partial equilibrium model that features heterogeneous firms, uncertainty shocks and various forms of capital adjustment costs is built in order to reassess whether temporarily higher uncertainty can cause recessions. It is then shown that while uncertainty shocks to demand can cause the bust, rebound and overshoot dynamics reminiscent of recessions, uncertainty shocks to total factor productivity are likely to lead to considerable and prolonged booms in economic activity. The reason for this result is that while the expectational effect of uncertainty shocks is negative and similar in magnitude for both types of uncertainty shocks, the positive distributional effect is an order of magnitude larger for total factor productivity than for demand. Chapter two then derives and implements an identification strategy for uncertainty shocks within a Structural Vector Autoregression framework that is consistent with the way these shocks are commonly modeled in the literature. For the US it is shown that such model consistent uncertainty shocks lead to considerable booms in investment and employment and only explain a small fraction of the variation in the cross-sectional sales variance. Once uncertainty shocks are identified as the shocks that only affect dispersion upon impact, they cause a moderate drop, rebound and overshoot of investment and a large increase in the cross-sectional dispersion of revenues. The results suggest that the standard timing assumption that the expectational effect of uncertainty shocks leads the distributional effect seems questionable. Finally, chapter three analyses endogenous variations in uncertainty and their effect on aggregate dynamics that result from imperfect information in the presence of occasional regime shifts. In a tentative model parameterization to the German manufacturing industry during the Financial Crisis it is shown that after a temporary regime shift imperfect information leads endogenously to higher forecast standard errors compared to full information, as well as higher cross-sectional dispersion of mean forecasts and forecast standard errors. It is then shown that these endogenous variations in uncertainty can lead to considerable downward amplification and some propagation of aggregate investment and revenues during a temporary downward regime shift.
    Date: 2012

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