nep-bec New Economics Papers
on Business Economics
Issue of 2013‒11‒16
nine papers chosen by
Vasileios Bougioukos
Bangor University

  1. The performance impact of firm ownership transformation in China By Beirne, John; Liu, Guy S.; Sun, Pei
  2. Corporate governance and corporate social performance By Kurt A. Desender; Mircea Epure
  3. ENTREPRENEURSHIP OVER THE BUSINESS CYCLE By Yu, Li; Orazem, Peter; Jolly, Robert W.
  4. Comparative Statics for Oligopoly: A Generalized Result By Naoto Jinji
  5. Do middle managers matter? By Elena Feltrinelli; Roberto Gabriele; Sandro Trento
  6. Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy By A. Kerem Cosar; Nezih Guner; James Tybout
  7. Working in family firms : less paid but more secure ? Evidence from French matched employer-employee data By Rebérioux, Antoine; Caroli, Eve; Breda, Thomas; Bassanini, Andrea
  8. Internet Adoption and Firm Exports in Developing Economies By Jonathan Timmis
  9. Firm valuation and the uncertainty of future tax avoidance By Jacob, Martin; Schütt, Harm

  1. By: Beirne, John; Liu, Guy S.; Sun, Pei
    Abstract: Does firm ownership change affect performance? On the basis of a mean-value analysis and a fixed effects panel analysis of over 1100 Chinese companies during the period of ownership reform (1997-2003), this paper examines the performance impact of firm ownership transformation in China. The data used allows us to compare the performance impacts of different methods taken to restructure the ownership of state firms, such as full versus partial privatisation. For China, a state-capitalist nation and the world’s largest state sector under transition, the mix of state and private ownership – partial privatisation – emerges as the best performing type of ownership model for firms. Here, the firm can gain the best synergy of both state support and private business strength. The experience of the Chinese reform shows that the political context and system are important influencing factors on ownership preference for a firm. JEL Classification: L33, O40, P27
    Keywords: Chinese enterprise reform, corporate governance, firm ownership, Firm performance, privatisation
    Date: 2013–10
  2. By: Kurt A. Desender; Mircea Epure
    Abstract: By integrating the agency and stakeholder perspectives, this study aims to provide a systematic understanding of the firm- and institutional-level corporate governance factors that affect corporate social performance (CSP). We analyze a large global panel dataset and reveal that CSP is positively associated with board independence, but negatively with ownership concentration. These results underscore the idea that the benefits of CSP do not flow to shareholders to the same extent as the costs and that the allocation of resources to CSP is lower when shareholders are powerful. Furthermore, these findings indicate that independent directors should be understood as agents in their own right, not only focused on defending shareholder interests. We also find that CSP is negatively related to investor protection and shareholder-oriented environments, while it is positively related to egalitarian environments. Finally, we jointly analyze firm-level drivers and institutional contexts.
    Keywords: corporate social performance; corporate governance; agency theory; stakeholder theory
    JEL: A13 G3 M0 M1 M14 M4 M41
    Date: 2013–10
  3. By: Yu, Li; Orazem, Peter; Jolly, Robert W.
    Abstract: The fraction self-employed rises in recessions because wage work is more sensitivethan self-employment to the business cycle, not because of necessityentrepreneurship. Graduating during a recession reduces the probability of starting a business forthe next 11 years.
    Keywords: Entrepreneurship; Boom; Bust; Delay; Graduates
    JEL: J2
    Date: 2013–10–28
  4. By: Naoto Jinji
    Abstract: We perform comparative statics for a general model of asymmetric oligopoly and derive a concise formula for the response of one firm to a marginal change in its rival’s strategic variable, taking into account the responses of all other firms. We obtain the conditions under which the sign of this response coincides with that of the mixed second-order partial derivative of the firm’s payoff function. We then propose a distinction between gross and net strategic relationships (i.e., strategic substitute and complement).
    Keywords: comparative statics, asymmetry, stability conditions
    JEL: L13 D43 C62
  5. By: Elena Feltrinelli; Roberto Gabriele; Sandro Trento
    Abstract: Middle Managers (MM) are key figures for firm ability to gain and sustaining competitive advantage (CIT). Their training activity can be seen as an important tool for improving and upgrading managerial practices to sustain firm strategy that is strictly related with its competitive advantage. The present research aims at deepening the analysis undertaken within the literature branch concerned with the effects of training of middle managers on direct measures of firm performance as measured by profitability indices and productivity. In particular, the study focuses on middle management continuing vocational training in the Italian manufacturing sector in the time window 2006-2011. The study is based on a novel database containing balance sheet data together with exhaustive information about the training undertaken by managers working in the sample of companies available Ð provided by Fondirigenti. The study extends and deepens the existing literature based on two key aspects: (a) the possibility to disaggregate the training activity along two dimensions: the methodology used and the field in which the training is done; (b) the opportunity to use different more precise measures of training, namely the cost in euros and the time devoted to the activity. We empirically test, using regression models based on GMM estimation, a set of research hypotheses and we find support for the five following hypotheses: (H1) Middle management continuing vocational training has an effect on performance indicators namely ROI, ROE and TFP, Moreover the first two show a TMGT effect; MM training is more effective for: larger firms, older firms (H2 and H3); external resources are important in making MM training effective (H3); different methodologies of training have heterogeneous effects on performance: experiential methods are more effective than relational and front lesson methods (H5). We discuss the results and derive some policy conclusions
    Keywords: Managerial Training, firm performance, IV-GMM, TMGT
    Date: 2013
  6. By: A. Kerem Cosar; Nezih Guner; James Tybout
    Abstract: This paper explores the combined effects of reductions in trade frictions, tariffs, and firing costs on firm dynamics, job turnover, and wage distributions. It uses establishment-level data from Colombia to estimate an open economy dynamic model that links trade to job flows in a new way. The fitted model captures key features of Colombian firm dynamics and labor market outcomes, as well changes in these features during the past 25 years. Counterfactual experiments imply that integration with global product markets has increased both average income and job turnover in Colombia. In contrast, the experiments find little role for this country’s labor market reforms in driving these variables. The results speak more generally to the effects of globalization on labor markets in Latin America and elsewhere.
    Keywords: international trade, firm dynamics, size distribution, labor market frictions, inequality
    JEL: F12 F16 E24 J64 L11
    Date: 2013–11
  7. By: Rebérioux, Antoine; Caroli, Eve; Breda, Thomas; Bassanini, Andrea
    Abstract: We study the compensation package offered by family firms. Using matched employer-employee data for a sample of French establishments in the 2000s, we first show that family firms pay on average lower wages to their workers. This family/non-family wage gap is robust to controlling for several establishment and individual characteristics and does not appear to be due either to the differential of productivity between family and non-family firms or to unobserved establishment and individual heterogeneity. Moreover, it is relatively homogeneous across workers with different gender, educational attainment and age. By contrast, the family/non-family wage gap is found to be larger for clerks and blue-collar workers than for managers, supervisors and technicians, for whom we find no significant wage gap. As a second step, we investigate why workers stay in family firms while being paid less. We show that these firms offer greater job security. We find evidence that the rate of dismissal is lower in family than in non-family firms. We also show that family firms rely less on dismissals and more on hiring reductions when they downsize. These results are confirmed by subjective data : the perceived risk of dismissal is significantly lower in family firms than in non-family ones. We speculate that our results can be explained either by a compensating wage differential story or by a model in which workers sort in different firms according to their preferences.
    Keywords: Family firms; wages; job security; linked employer-employee data;
    JEL: G34 J31 J33 J63 L26
    Date: 2013–04
  8. By: Jonathan Timmis
    Abstract: This paper investigates the effect of Internet technology on how firms access export markets - directly or via intermediaries. Empirical evidence suggests that technology diffusion is geographically localised, with spillover effects from neighbouring firms decaying quickly over short distances. To address the endogeneity of Internet adoption, I construct an instrument that captures these local network effects, by matching IP addresses to firm locations. Using a cross-section of firms in 18 developing countries I find that Internet access magnifies direct trade with no discernible effect on intermediated trade. Adopting the Internet because of local networks increases direct exports as a proportion of firm sales by 32-36%. The analysis is robust to consideration of a wide-range of potentially omitted variables.
    Keywords: Internet, technology, intermediation, international trade, heterogeneous firms
    Date: 2013
  9. By: Jacob, Martin; Schütt, Harm
    Abstract: The paper studies the effect of uncertainty in tax avoidance on firm value. We first show in a clean surplus valuation model that expected tax rates interact with expectations about future profitability. This paper builds and tests a valuation framework that incorporates two outcome dimensions of corporate tax avoidance strategies: the stability and the level of expected tax rates. We develop a tax planning score that captures these two dimensions. The measure improves the prediction of future tax avoidance. We finally show that the tax planning score strengthens the effect of pre-tax earnings on firm value. Firms with effective and persistent tax planning have a stronger effect of pre-tax earnings on firm value while firms with poor tax planning or volatile effective tax rates receive a discount on their earnings. --
    Keywords: firm valuation,tax avoidance,tax uncertainty
    JEL: M41 G12 H25
    Date: 2013

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