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on Business Economics |
| By: | Chia-Lin Chang; Hui-Kuang Hsu; Michael McAleer (University of Canterbury) |
| Abstract: | This paper investigates the stock returns and 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, stock returns, conditional volatility models, volatility size effects, asymmetry, tourism policy reform |
| JEL: | C22 G18 G28 G32 L83 |
| Date: | 2013–08–13 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:13/26&r=bec |
| By: | Altunok, Fatih; Oduncu, Arif |
| Abstract: | The firm growth dynamics is an important topic since the growth performance of firms is the main source of the economic growth in countries. Generally, crises produce a sharp decline in firms’ growth and this leads to a decline in both the level of employment and the income of households. This paper focuses on the role of firm leverage on the growth performance of the firm during the global financial crisis. We investigate whether the firms that experienced a large leverage increase before the global financial crisis has worse growth performance of 2007 to 2009 than the firms that didn’t experience this rise. The findings suggest that the poorer sales growth performance of the firm was related to the firm leverage increase before the global financial crisis. The evidence shows that the correlation between leverage growth and the poorer sales growth performance is robust to firm-level control variables, such as size, age, fixed assets, liquid assets, inventories, profitability, export share and industry-specific factor. |
| Keywords: | Leverage, Growth, Global Financial Crisis, Financial Stability |
| JEL: | G30 G32 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:49194&r=bec |
| By: | Halvarsson, Daniel (Ratio) |
| Abstract: | This paper empirically examines industry determinants of the shape of Swedish firm size distributions at the 3-digit (NACE) industry level between 1999-2004 for surviving firms. Recent theoretical studies have begun to develop a better understanding of the causal mechanisms behind the shape of firm size distributions. At the same time there is a growing need for more systematic empirical research. This paper therefore presents a two-stage empirical model, in which the shape parameters of the size distribution are estimated in a first stage, with firm size measured as number of employees. In a second stage regression analysis, a number of hypotheses regarding economic variables that may determine the distributional shape are tested. The result from the first step are largely consistent with previous statistical findings confirming a power law. The main finding, however, is that increases in industry capital and financial constraint exert a considerable influence on the size distribution, shaping it over time towards thinner tails, and hence fewer large firms. |
| Keywords: | Firm size distribution; Zipf's law; Gibrat's law |
| JEL: | D22 L11 L25 |
| Date: | 2013–08–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0214&r=bec |
| By: | Marco Bassetto; Marco Cagetti; Mariacristina De Nardi |
| Abstract: | We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm size distribution. As entrepreneurial firms can grow only slowly and rely heavily on retained earnings to expand the size of their business in this set-up, we show that, by reducing entrepreneurial firm size and earnings, negative shocks have a very persistent effect on real activity. In determining the speed of recovery from an adverse economic shock, the most important factor is the extent to which the shock erodes entrepreneurial wealth. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2013-06&r=bec |
| By: | Bjuggren, Per-Olof (Ratio & JIBBS); Eklund, Johan (Swedish Entreprenurship Forum,); Wiberg, Daniel (Swedish Ministry of Finance.) |
| Abstract: | This paper examines how institutional investors influence investment decisions and returns on investment. To measure investment performance we used a measure of marginal q which measures the ratio of the investment returns to cost of capital. Institutional owners are found to have had a positive effect on performance, with a marginally diminishing effect of institutional ownership concentration. We used longitudinal data on Swedish firms for the period 1999-2005, during which their ownership structure underwent dramatic changes: Institutional investors increased their ownership share, while ownership by Swedish households decreased. However, controlling owners - often founding families - remained in control by resorting to extensive use of dual-class shares, control rights, which separate from cash-flow. This was an important determinant of firm performance, eradicating the positive influence of institutional ownership. |
| Keywords: | Corporate governance; institutions; ownership; performance; Tobin’s q; marginal q |
| JEL: | C23 G30 L25 |
| Date: | 2013–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0208&r=bec |
| By: | Thomas Sampson (LSE) |
| Abstract: | This paper develops an open economy growth model in which firm heterogeneity increases the gains from trade. Technology spillovers from incumbent firms to entrants cause the productivity threshold for firm survival to grow over time as competition becomes tougher. By raising the profits of exporters, trade increases the entry rate and generates a dynamic selection effect that leads to higher growth. The paper shows that the gains from trade can be decomposed into: static gains that equal the total gains from trade in an economy without technology spillovers, and; dynamic gains that are strictly positive. Since trade raises growth through selection, not scale effects, the positive growth effect of trade vanishes when firms are homogeneous. Thus, firm heterogeneity creates a new source of dynamic gains from trade. Calibrating the model to the U.S. economy implies that dynamic selection approximately triples the gains from trade. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed013:125&r=bec |
| By: | Holger Görg; Adnan Seric |
| Abstract: | This paper uses firm level data for 19 African countries to look at the link between domestic firms’ business relationship with multinationals and their performance in terms of innovation and productivity. Quite uniquely, we also evaluate the importance of support received by the domestic firm, either from the government or the multinational business partner, for this link. Overall, our data analysis shows that for the average domestic firm, supplying to a foreign multinational in the country (the backward linkage) is positively associated with product innovation. Buying from a multinational (the forward linkage) is positively associated with labor productivity. These results are independent of any type of support from the government or multinationals. We also find that domestic firms’ process innovation activity is only positively associated with supplying a multinational if the firm also receives assistance from the government or multinational. Furthermore, we find that supplying a multinational is only positively associated with domestic firms’ productivity if the firm received technology transfer from the multinational customers |
| Keywords: | multinationals, technology transfer |
| JEL: | F23 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1867&r=bec |
| By: | Kaiser, Ulrich; Müller, Bettina |
| 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 difficulites associated with workforce heterogeneity (like affective condlict or coordination cost) as well as \homophily (peoples 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,Startups,Skill Heterogeneity,Team Dynamics |
| JEL: | C10 L26 M13 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:13058&r=bec |
| By: | Daniel Cracau (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Benjamin Franz (University of Oxford, Mathematical Institute) |
| Abstract: | We study a sequential Bertrand game with one dominant market incumbent and multiple small entrants selling homogeneous products. Whilst the equilibrium for the case of a single entrant is well-known from Gelman and Salop (1983), we derive properties of the N-firm equilibrium and present an algorithm that can be used to calculate this equilibrium. Using this algorithm we derive the exact equilibrium for the cases of two and three small entrants. For more than three entrants only approximate results are possible. We use numerical results to gain further understanding of the equilibrium for an increasing number of firms and in particular for the case where N diverges to infinity. Similarly to the two-firm Judo equilibrium, we see that a capacity limitation for the small rms is necessary to achieve positive profits. |
| Keywords: | Sequential Bertrand Competition, Judo Economics, N-firm oligopoly |
| JEL: | D43 L11 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:mag:wpaper:130013&r=bec |
| By: | Fackler, Daniel (University of Erlangen-Nuremberg); Schnabel, Claus (University of Erlangen-Nuremberg) |
| Abstract: | Using a 50 percent sample of all establishments in the German private sector, we report that spinoffs are larger and initially employ more skilled and more experienced workers than other startups. Controlling for these and other differences, we find that spinoffs are less likely to exit than other startups. We show that in West and East Germany and in all sectors investigated pulled spinoffs (where the parent company continues after they are founded) generally have the lowest exit hazards, followed by pushed spinoffs (where the parent company stops operations). The difference between both types of spinoffs is particularly pronounced in the first three years. Contrary to expectations, intra-industry spinoffs are not found to have lower exit hazards in our sample. |
| Keywords: | spinoffs, startups, firm exits, Germany |
| JEL: | L2 D22 M13 C41 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7542&r=bec |
| By: | Ross Levine; Yona Rubinstein |
| Abstract: | We disaggregate the self-employed into incorporated and unincorporated to distinguish between "entrepreneurs" and other business owners. The incorporated self-employed have a distinct combination of cognitive, noncognitive, and family traits. Besides coming from higher-income families with better-educated mothers, the incorporated - as teenagers - scored higher on learning aptitude tests, had greater self-esteem, and engaged in more aggressive, illicit, risk-taking activities. The combination of "smarts" and "aggressive/illicit/risk-taking" tendencies as a youth accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. In contrast to a large literature, we also find that entrepreneurs earn much more per hour than their salaried counterparts. |
| Keywords: | Self-employment, Occupational choice, Compensation, Firm organization, Corporate finance, Cognitive and Noncognitive traits |
| JEL: | L26 J24 J3 G32 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1237&r=bec |
| By: | Kenza Benhima |
| Abstract: | This paper lays down a model where dispersed information generates booms and busts in economic activity. Boom-and-bust dynamics start when firms are initially over-optimistic about demand due to an aggregate noise shock in their signals. Consequently, they over-produce, which generates a boom. This however also depresses their mark-ups, which, to firms, signals low demand and overturns their expectations, generating a bust. This emphasizes a novel role for imperfect common knowledge: dispersed information makes firms ignorant about their competitors' actions, which makes them confuse high noise-driven supply with low fundamental demand. Boom-and-bust episodes are more dramatic when the aggregate noise shocks are more unlikely and when congestion effects are stronger. |
| Keywords: | Imperfect Common Knowledge; Expectations; Recessions |
| JEL: | E32 D83 D52 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:13.11&r=bec |
| By: | Rupayan Pal (Indira Gandhi Institute of Development Research) |
| Abstract: | We revisit the classic profit-ranking of Cournot and Bertrand equilibria and the issue of endogenous choice of a price or a quantity contract, but for a network goods duopoly. We show that, if network externalities are strong (weak), each firm earns higher (lower) profit under Bertrand competition than under Cournot competition. Therefore, unless network externalities are weak, the classic profit-ranking is reversed. When modes of product market competition are endogenously determined, Cournot equilibrium always constitutes the subgame perfect Nash equilibrium (SPNE). However, a prisoners's dilemma type of situation arises and the SPNE is Pareto inefficient, unless network externalities are weak. |
| Keywords: | Network externalities, Cournot, Bertrand, Profit ranking, Endogenous mode of competition |
| JEL: | D43 L13 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2013-014&r=bec |
| By: | Michael R. Strain (American Enterprise Institute) |
| Abstract: | The instability of labor earnings in the United States contributes to earnings inequality and may diminish household welfare. Despite the importance of earnings instability little is known about its correlates or causes. This paper seeks to better understand earnings instability by studying whether volatile firms pay volatile earnings. |
| Keywords: | Labor economics,AEI Economic Policy Working Paper Series |
| JEL: | A H J |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:aei:rpaper:37300&r=bec |
| By: | Ben Ammar, Semir; Eling, Martin |
| Abstract: | The risk of infrastructure firms is driven by unique factors that cannot be well described by standard asset class factor models. We thus create a seven-factor model based on infrastructure-specific risk exposure, i.e., market risk, cash flow volatility, leverage, investment growth, term risk, default risk, and regulatory risk. We empirically test our model on a large dataset of U.S. infrastructure stocks in different subsectors (utility, telecommunication, and transportation) and over a long period of time (1980 to 2011). The new factor model is able to capture the variation of infrastructure returns better than the Fama/French three-factor or the Carhart four-factor models. Thus, our model helps to better determine the cost of capital of infrastructure firms, something that is increasingly relevant in light of the growing need for privately financed infrastructure projects. |
| Keywords: | Infrastructure, Asset class, Factor model, Fama/French factors, Leverage, Cash ow volatility, Investment factor. |
| JEL: | G11 G12 G19 O18 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:usg:sfwpfi:2013:07&r=bec |
| By: | Halvarsson, Daniel (Ratio) |
| Abstract: | This paper investigates the role(s) of high-growth firms (HGFs) in the robust growth-rate distribution. HGFs are identified as firms for which the growth-rate distribution exhibits power-law decay. In contrast to the traditional means of identifying HGFs, a distributional approach eliminates the need to specify an arbitrary growth rate or percentage share. The latter approach is illustrated by the growth-rate distribution for Swedish data on incorporated firms at the aggregate level and at the 2-digit industry level. The empirical results indicate that a power law is sometimes present in the growth-rate distribution and suggest that HGFs are rarer than previously thought. |
| Keywords: | High-growth firms; Gazelles; Firm growth-rate distribution; Laplace distribution; Power law |
| JEL: | D22 L11 L25 |
| Date: | 2013–08–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0215&r=bec |
| By: | Semih Akcomak; Henri de Groot; Stefan Groot |
| Abstract: | This contribution uses an extensive and unique set of combined Dutch micro-data to analyze the relationship between three dimensions of globalization and unemployment. These dimensions are firm level exports, offshorability of jobs, and working for a foreign-owned firm. Both the probability of getting fired and the time that is needed to find a new job after having been fired are studied. A large share of the variation in unemployment incidence is related to worker characteristics. Women, younger workers and foreign-born workers are more likely to become unemployed. After controlling for worker and firm heterogeneity, we find no evidence for a statistically significant relationship between exporting, working for a foreign firm and having an offshorable job, and the probability that an employee is fired. Furthermore, exposure to globalization prior to getting unemployed is not related to the probability of finding a new job after an employee has been fired. |
| JEL: | J64 J62 F16 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:252&r=bec |