nep-bec New Economics Papers
on Business Economics
Issue of 2013‒12‒20
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Managing the Family Firm: Evidence from CEOs at Work By Oriana Bandiera; Andrea Prat; Raffaella Sadun
  2. Firm Policies and the Cross-Section of CDS Spreads By : Andrea Gamba; : Alessio Saretto
  3. Competitive Market Segmentation By Silvio Sticher
  4. Corporate Governance and Firm-Specific stock Price Crashes By : Panayiotis C. Andreou; : Constantinos Antoniou; : Joanne Horton; : Christodoulos Louca
  5. Does trade shrink the measure of domestic firms? By João Barata R. B. Barroso
  6. Human resource management: how much do firms really need? By Alex Bryson; Michael White
  7. Firm Risk and Leverage Based Business Cycles By Sanjay K. Chugh
  8. The Costs of Recruiting Apprentices: Evidence from German Firm-Level Data By Samuel Muehlemann; Harald Pfeifer; Felix Wenzelmann
  9. Firm competition in a probabilistic framework of consumer choice By Hao Liao; Rui Xiao; Duanbing Chen; Matus Medo; Yi-Cheng Zhang
  10. Heterogenous firms and credit frictions: a general equilibrium analysis of market entry decisions By Sara Formai
  11. Business Literacy and Development: Evidence From a Randomized Controlled Trial in Rural Mexico By Gabriela Calderón; Jesse M. Cunha; Giacomo De Giorgi

  1. By: Oriana Bandiera; Andrea Prat; Raffaella Sadun
    Abstract: CEOs affect the performance of the firms they manage, and family CEOs seem to weaken it. Yet little is known about what top executives actually do, and whether it differs by firm ownership. We study CEOs in the Indian manufacturing sector, where family ownership is widespread and the productivity dispersion across firms is substantial. Time use analysis of 356 CEOs of listed firms yields three sets of findings. First, there is substantial variation in the number of hours CEOs devote to work activities, and longer working hours are associated with higher firm productivity, growth, profitability and CEO pay. Second, family CEOs record 8% fewer working hours relative to professional CEOs. The difference in hours worked is more pronounced in low-competition environments and does not seem to be explained by measurement error. Third, difference in differences estimates with respect to the cost of effort, due to weather shocks and popular sport events, reveal that the observed difference between family and professional CEOs is consistent with heterogeneous preferences for work versus leisure. Evidence from six other countries reveals similar findings in economies at different stages of development.
    Keywords: CEO, Time, Family firms, Competition, Productivity
    JEL: M12 L2 D24
    Date: 2013–12
  2. By: : Andrea Gamba; : Alessio Saretto
    Date: 2013
  3. By: Silvio Sticher
    Abstract: In a two-firm model where each firm sells a high-quality and a low-quality version of a product, customers differ with respect to their brand preferences and their attitudes towards quality. We show that the standard result of quality-independent markups crucially depends on the assumption that the customers' valuation of quality is identical across firms. Once we relax this assumption, competition across qualities leads to second-degree price discrimination. We find that markups on low-quality products are higher if consuming a low-quality product involves a firm-specific disutility. Likewise, markups on high-quality products are higher if consuming a high-quality product creates a firm-specific surplus.
    Keywords: price differentiation; vertical competition
    JEL: D43 L13 L15
    Date: 2013–12
  4. By: : Panayiotis C. Andreou; : Constantinos Antoniou; : Joanne Horton; : Christodoulos Louca
    Date: 2013
  5. By: João Barata R. B. Barroso
    Abstract: Does international trade shrink the steady state measure of domestic firms? The most recent models with heterogeneous firms suggest it does (Melitz (2003), Chaney (2007) and Arkolakis (2008)). The main force at work in such models is the selection of the fittest, with the least efficient firms exiting the market. Within the same class of models with heterogeneous firm productivity and strong selection effects, both in the consumption goods and the intermediate goods sectors, this paper shows that the measure of domestic firms may actually expand. The result is robust to the particular production function used to bundle labor and intermediate goods
    Date: 2013–11
  6. By: Alex Bryson; Michael White
    Abstract: More complete systems of human resource management (HRM) could deliver really extensive gains in employee motivation, according to an analysis of representative data from British workplaces by Michael White and Alex Bryson. Their research explores whether the introduction of 'high-performance work systems' really make a difference to business performance and whether it is possible for firms to have 'too little' or 'too much' HRM. They find that workplace attitudes become steeply and progressively more positive once a threshold of HRM practices has been reached. But in terms of employee attitudes, it might be better to have no HRM than just a little. At present, a half of British workplaces are experiencing slightly depressed employee attitudes.
    Keywords: Human resource management, high performance, organizational commitment
    JEL: J28 L23 M12 M54
    Date: 2013–12
  7. By: Sanjay K. Chugh (Boston College)
    Abstract: I characterize cyclical fluctuations in the cross-sectional dispersion of firm-level productivity in the U.S. manufacturing sector. Using the estimated dispersion, or "risk," stochastic process as an input to a baseline DSGE financial accelerator model, I assess how well the model reproduces aggregate cyclical movements in the financial conditions of U.S. non-financial firms. In the model, risk shocks calibrated to micro data induce large and empirically-relevant fluctuations in leverage, a nancial measure typically thought to be closely associated with real activity. In terms of aggregate quantities, however, pure risk shocks account for only a small share of GDP fluctuations in the model, less than one percent. Instead, it is standard aggregate productivity shocks that explain virtually all of the model's real fluctuations. These results reveal a dichotomy at the core of a popular class of DSGE financial frictions models: risk shocks induce large financial fiuctuations, but have little effect on aggregate quantity fluctuations.
    Keywords: leverage, second-moment shocks, time-varying volatility, credit frictions, financial accelerator, business cycles
    JEL: E10 E20 E32 E44
    Date: 2013–03–02
  8. By: Samuel Muehlemann (University of Bern & IZA Bonn); Harald Pfeifer (Federal Institute for Vocational Education and Training (BIBB) Bonn & Research Centre for Education and the Labour Market (ROA) Maastricht); Felix Wenzelmann (Federal Institute for Vocational Education and Training (BIBB) Bonn)
    Abstract: In this paper, we use firm-level data to analyse a firmÕs costs of recruiting apprentices in Germany. We find that recruitment costs amount on average to 600 Euros per hire (approximately one month of apprentice pay), but costs are heterogenous across firms and vary strongly with the training occupation. Our results suggest that shortages in the local supply of apprentices and a high degree of competition among training firms in the region increase recruitment costs. Furthermore, we find that firms with a works council or an investment-oriented training strategy incur higher recruitment costs. Finally, marginal recruitment costs first increase but eventually decrease for firms hiring a large number of apprentices. Our results are important in light of the increasing firm competition for talented school leavers induced by demographic change.
    Keywords: Recruitment costs, apprenticeship training, human capital investment, local labour markets, local training markets, demographic change
    JEL: J24 J32 J63 M53
    Date: 2013–12
  9. By: Hao Liao; Rui Xiao; Duanbing Chen; Matus Medo; Yi-Cheng Zhang
    Abstract: We develop a probabilistic consumer choice framework based on information asymmetry between consumers and firms. This framework makes it possible to study market competition of several firms by both quality and price of their products. We find Nash market equilibria and other optimal strategies in various situations ranging from competition of two identical firms to firms of different sizes and firms which improve their efficiency.
    Date: 2013–12
  10. By: Sara Formai (Bank of Italy)
    Abstract: This paper develops a general equilibrium model of international trade with heterogeneous firms and imperfect credit markets. To finance the costs for product innovation and domestic and foreign market entry, firms must raise external capital. The model underscores the importance of considering a general equilibrium setting in order to characterize fully the misallocations of resources that stem from the existence of credit frictions. These have important implications for firms' entry decisions in the different markets and for the welfare effects of imperfect financial institutions. Allowing for liquidity-constrained firms and imperfect credit markets alters, and in some cases reverses, some of the main results from the literature on heterogeneous firms. In particular, the model predicts that trade liberalization does not necessarily lead to an increase in average productivity and consumers' welfare.
    Keywords: consumer welfare, credit frictions, heterogeneous firms, market entry, trade liberalization
    JEL: F12 F36 G20
    Date: 2013–11
  11. By: Gabriela Calderón; Jesse M. Cunha; Giacomo De Giorgi
    Abstract: A large share of the poor in developing countries run small enterprises, often earning low incomes. This paper explores whether the poor performance of businesses can be explained by a lack of basic business skills. We randomized the offer of a free, 48-hour business skills course to female entrepreneurs in rural Mexico. We find that those assigned to treatment earn higher profits, have larger revenues, serve a greater number of clients, are more likely to use formal accounting techniques, and more likely to be registered with the government. Indirect treatment effects on those entrepreneurs randomized out of the program, yet living in treatment villages, are economically meaningful, yet imprecisely measured. We present a simple model of experience and learning that helps interpret our results, and consistent with the theoretical predictions, we find that “low-quality” entrepreneurs are the most likely to quit their business post-treatment, and that the positive impacts of the treatment are increasing in entrepreneurial quality.
    Keywords: business literacy, development, entrepreneurship
    JEL: C93 I25 O12 O14
    Date: 2013–12

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