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on Business Economics |
| By: | Jimmy A. Saravia |
| Abstract: | This paper reviews the empirical literature on corporate governance and firm performance and finds that it has yielded mixed results. The paper argues that a primary reason for this situation is that the relevant theories have not been applied to the class of phenomena they were designed to explain. In particular, the literature that focuses on ownership structure and firm performance employs entrepreneurial agency theories of the firm but applies them to managerial firms where ownership is separated from control. This is evidenced by the fact that firms in which managerial ownership is close to zero percent are included in the samples. Conversely, empirical work centered on the relationship between board composition and firm performance (which relies on managerial agency theories of the firm) not only does not make sure that the firms in their samples are characterized by the separation of ownership and control, but it also ignores the alternative managerial agency theory concerning the agency costs of free cash flows. Additionally, the paper maintains that other approaches, such as that which studies the relationship between indices of anti-takeover provisions and firm performance, do not rely on any particular theory and for this reason are beset by problems of interpretation. The paper concludes with recommendations for avoiding the drawbacks and achieving future progress. |
| Keywords: | Corporate Governance, Firm Performance, Agency Theory, Firm lifecycle |
| JEL: | G31 G34 |
| Date: | 2014–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:col:000122:010914&r=bec |
| By: | Barnett, Alina (Bank of England); Chiu, Adrian (Bank of England); Franklin, Jeremy (Bank of England); Sebastia-Barriel, Maria (Bank of England) |
| Abstract: | Labour productivity in the United Kingdom has been exceptionally weak since the 2007/08 financial crisis. This paper uses firm-level data from the Office for National Statistics Annual Business Survey and the Inter-Departmental Business Register to better understand the nature of this weakness. Overall, our findings are consistent with existing literature which finds that within-firm productivity growth tends to be procyclical and emphasises the importance of the reallocation of resources between firms and sectors for productivity growth. More specifically, we find that up until 2011 there was a doubling in the proportion of firms with shrinking output and flat employment. This suggests that firms were able to respond flexibly to weak demand conditions by retaining staff at the expense of measured productivity, suggestive of an opening up of spare capacity within firms. However, the strength of recent hiring behaviour since 2012 means that this is now likely to be less of a factor. The lack of labour shedding, together with a low firm exit rate, is also indicative of low levels of resource reallocation between firms and sectors. To assess the importance of this to aggregate productivity growth we apply the method used by Baily, Bartelsman and Haltiwanger. We find that reallocation between firms (in terms of both the movement of labour and firm entry and exit) contributed significantly to aggregate productivity growth before the crisis, but its contribution fell substantially after. In fact, around one third of the productivity slowdown after 2007 can be attributed to slower reallocation of resources. The extent to which reduced factor reallocation, and so the weakness in productivity growth, persists remains a key question for the economic outlook. |
| Keywords: | Productivity growth; long-run growth; resource reallocation; entry; exit; financial crisis |
| JEL: | E32 L11 O47 |
| Date: | 2014–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0495&r=bec |
| By: | Nicholas Bloom; Renata Lemos; Raffaella Sadun; Daniela Scur; John Van Reenen |
| Abstract: | Over the last decade the World Management Survey (WMS) has collected firm-level management practices data across multiple sectors and countries. We developed the survey to try to explain the large and persistent TFP differences across firms and countries. This review paper discusses what has been learned empirically and theoretically from the WMS and other recent work on management practices. Our preliminary results suggest that about a quarter of cross-country and within-country TFP gaps can be accounted for by management practices. Management seems to matter both qualitatively and quantitatively. Competition, governance, human capital and informational frictions help account for the variation in management. We make some suggestions for both policy and future research. |
| Keywords: | Management, organization, productivity |
| JEL: | L2 M2 O14 O32 O33 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepops:41&r=bec |
| By: | Thi QuyVo; Duc Khuong Nguyen; Fredric WilliamSwierczek |
| Abstract: | We investigate the impacts of state shareholding, corporate culture and employee commitment on corporate perfor- mance of privatized firms in the Vietnamese context. Using data collected from a structured questionnaire as well as companies’ annual reports, we show that only organizational integration significantly affects the performance of privatized firms. Furthermore, employee and customer satisfactions are among the most important drivers of corpo- rate performance. Finally, there is evidence to suggest that privatized firms with less state ownership perform better than those with more state ownership. |
| Date: | 2014–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-240&r=bec |
| By: | Petr MATOUS; TODO Yasuyuki |
| Abstract: | The network structures of interfirm interactions have been linked previously to disaster resilience. However, the dynamic drivers of interfirm network structures rarely have been explored in the literature. This paper uses stochastic actor-oriented modeling to examine how networks of economic interactions among the 500 largest Japanese companies were created and maintained between 2010 and 2011, i.e., before and after the Great East Japan Earthquake. Controlling for geographical distance between firms' headquarters and for firm size, we find that firms preferred trading partners that generally were popular among other firms, had clients in common with them, and also had bought some products or services from them, and that firms avoided firms with connections to independent suppliers in other cliques. These tendencies have potential implications for disaster resilience and the revival of the Japanese economy. |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:14020&r=bec |
| By: | Jimmy A. Saravia |
| Abstract: | According to firm lifecycle theory the agency costs of free cash flows are not transitory problems, but are a recurrent issue once firms reach a certain stage in their lifecycle. In particular, as firms mature their cash flows increase substantially while their investment opportunities decline and, to prevent retrenchment, managements need to invest in negative net present value projects. However, too much overinvestment leads to low firm valuation and potentially a hostile takeover. This paper extends firm lifecycle theory by arguing that to neutralize the threat of takeover, managements of maturing firms and their boards of directors progressively deploy antitakeover provisions which allow them to overinvest safely and prevent a decline in the size of their corporations. Firm lifecycle theory is also tested empirically. In this respect, a contribution of this paper is to develop a new empirical index that permits the identification of mature corporations with governance problems due to agency costs of free cash flows. The empirical results show that as firms mature agency costs of free cash flows increase, more antitakeover provisions are put into place and firms invest in projects with returns below their cost of capital. |
| Keywords: | Firm Life Cycle; Free Cash flows; Corporate Governance; Overinvestment |
| JEL: | G31 G34 |
| Date: | 2013–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:col:000122:010927&r=bec |
| By: | Michael A. Flor (University of Augsburg, Department of Economics) |
| Abstract: | We consider the cyclical properties of the German economy prior and after reunification in 1990 from the perspective of a real business cycle model. The model provides the framework for the selection and consistent measurement of the variables whose time series properties characterize the cycle. Simulations of the calibrated model reveal the model's potential to interpret the data. Major findings are that: i) the volatility of most aggregate time series has not changed significantly between the two time periods, ii) despite many conceptual differences between the European and the U.S. System of Accounts, the calibrated parameter values for the German economy are within the range of values usually employed in the real business cycle literature, iii) the model is closer to the data for the time period prior to reunification. |
| Keywords: | Macroeconomic Data, National Income, Product Accounts, Economic Fluctuations, Real Business Cycles |
| JEL: | C82 E01 E32 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:aug:augsbe:0324&r=bec |
| By: | Viktor Avrutin (DESP, University of Urbino and IST, University of Stuttgart, Germany); Iryna Sushko (Institute of Mathematics, National Academy of Sciences of Ukraine); Fabio Tramontana (Department of Economics and Management, University of Pavia) |
| Abstract: | We study the bifurcation structure of the parameter space of a 1D continuous piecewise linear bimodal map which describes dynamics of a business cycle model introduced by Day-Shafer. In particular, we obtain the analytical expression of the boundaries of several periodicity regions associated with attracting cycles of the map (principal cycles and related ?n structure) crossing which the map has robust chaotic behavior. |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:pav:demwpp:demwp0076&r=bec |
| By: | Keiichiro Kobayashi; Daichi Shirai |
| Abstract: | This paper uses a simple heterogeneous-agent economy model to show that redistribution of wealth among heterogeneous agents can play a significant role in business cycle dynamics and financial crises. In an economy where firms with heterogeneous productivity operate under borrowing constraints, redistribution of wealth reproduces the key features of business cycle fluctuations such as persistence and nonlinearity in output and labor, and procyclicality in observed productivity. This model suggests the hypothesis that a redistribution shock may be one of the key driving forces of business cycles. The aggregate variables exhibit strong nonlinearity in both our model and the standard model: however, while the behavior of individual agents does not involve nonlinearity in our model, strong nonlinearity is assumed in the standard model. |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cnn:wpaper:14-004e&r=bec |
| By: | Foley, Maggie; Cebula, Richard; Houmes, Robert |
| Abstract: | This study investigates the role of ownership structure and anti-takeover measure in proxy contests using the nested logistic model. Findings indicate that dissidents target small firms with high agency costs, poor performance, and a high volume of prior shareholder proposals for Media Threats. Following a Media Threat, dissidents target firms with more independent boards, with the next step being a SEC filing of a proxy fight. After that, management in firms with "poison pills" and less independent boards are more likely to settle contests with dissidents, while firms with lower insider ownership are more likely to go through a proxy fight. |
| Keywords: | proxy fight; institutional shareholders; anti-takeover measures; nested logistic model |
| JEL: | D72 D74 G32 G34 |
| Date: | 2014–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55428&r=bec |