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on Business Economics |
| By: | Paul Ehling (BI Norwegian business school); David Haushalter (Sheal college of business) |
| Abstract: | Using a database of more than 180,000 private companies from 2000 to 2009, we find that the benefits of holding more cash vary substantially with a firm’s size and the conditions it faces. Cash holdings matter most for small firms: when there are negative shocks to industry or macroeconomic conditions, a small firm’s cash holdings are positively associated with changes in its sales and assets. Cash is less important for other conditions. Differences in the benefits of cash holdings between large and small firms are traced to a firm’s ability – and willingness – to increase leverage when there is a cash shortfall. |
| Keywords: | cash holdings, benefits of cash holdings, private companies |
| JEL: | G30 G32 G35 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1412&r=bec |
| By: | Marcel Fafchamps; Simon Quinn |
| Abstract: | We run a novel field experiment to link managers of African manufacturing firms. The experiment features exogenous link formation, exogenous seeding of information and exogenous assignment to treatment and placebo. We study the impact of the experiment on firm business practices outside of the lab. We find that the experiment successfully created new variation in social networks. We find some limited evidence of diffusion of management practices, particularly in terms of firm formalisation and innovation. Such diffusion appears to be a combination of diffusion of innovation and simple imitation |
| JEL: | D22 L26 O33 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2014-25&r=bec |
| By: | F. Barigozzi; N. Burani |
| Abstract: | We study optimal contracts offered by two firms competing for the exclusive services of one worker, who is privately informed about her ability and her motivation. Firms differ both in their production technology and in the mission they pursue and a motivated worker is keen to be hired by the mission-oriented firm. We find that the matching of worker types to firms is always Pareto-efficient. When the difference in firms’ technology is high, only the most efficient firm is active. When the difference is not very high, then agent types sort themselves by motivation: the mission-oriented firm hires motivated types and the profit-oriented firm employs non-motivated ones, independently of ability. Effort provision is higher when the worker is hired by the mission-oriented firm, but a compensating wage differential might exist: the motivated worker is paid less by the mission-oriented firm. Such an earnings penalty is driven entirely by motivation and is increasing in ability. |
| JEL: | D82 D86 J31 M55 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp953&r=bec |
| By: | Ana Fernandes (University of Exeter); Heiwai Tang (Johns Hopkins University, CESIfo and Centro Studi Luca d\'Agliano) |
| Abstract: | This paper studies how learning from neighboring firms affects new exporters\' performance. We develop a statistical decision model in which a firm updates its prior belief about demand in a foreign market based on several factors, including the number of neighbors currently selling there, the level and heterogeneity of their export sales, and the firm\'s own prior knowledge about the market. A positive signal about demand inferred from neighbors\' export performance raises the firm\'s probability of entry and initial sales in the market but, conditional on survival, lowers its post-entry growth. These learning effects are stronger when there are more neighbors to learn from or when the firm is less familiar with the market. We find supporting evidence for the main predictions of the model from transaction-level data for all Chinese exporters from 2000 to 2006. Our findings are robust to controlling for firms\' supply shocks, countries\' demand shocks, and city-country fixed effects. |
| Keywords: | learning to export, knowledge spillover, uncertainty, export dynamics |
| JEL: | F1 F2 |
| Date: | 2014–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:370&r=bec |
| By: | F. Delbono; L. Lambertini |
| Abstract: | We charaterise the socially optimal mix of firms in an oligopoly with both profit-seeking and labour-managed firms. The policy maker faces a twofold externality: (i) production entails the exploitation of a common pool natural resource and (ii) production/consumption pollutes the environment. We study the relationship between firms' mix and social welfare in the Cournot-Nash equilibrium of the industry and the resulting policy implications. |
| JEL: | L13 H23 P13 Q50 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp955&r=bec |
| By: | Jože P. Damijan (Faculty of Economics, University of Ljubljana.) |
| Abstract: | The paper studies the extent of corporate leverage and range of excessive debt of Slovenian firms during the recent financial crisis. Half of all firms (of those with some non-zero debt and at least one employee) are found to face an unsustainable debt-to-EBITDA leverage ratio beyond 4, accounting for almost 80 per cent of total outstanding debt. Moreover, a good quarter of all firms experience debt-to-EBITDA ratios exceeding 10 and hold almost half of total aggregate net debt. We then examine how this financial distress affects firm performance in terms of productivity, employment, exports, investment and survival. We find that, while less important during the good times (prerecession period), lack of firm financial soundness during the period of financial distress becomes a critical factor constraining firm performance. The extent of financial leverage and ability to service the outstanding debt are shown to inhibit firms’ productivity growth as well as the dynamics of exports, employment and investment. Micro and small firms are found to suffer relatively more than larger firms from high leverage in terms of export and employment performance during the recession period. |
| Keywords: | financial crisis, corporate debt restructuring, insolvency, bank restructuring |
| JEL: | G33 G34 K22 K30 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:ebd:wpaper:168&r=bec |
| By: | L. Lambertini; G. Zaccour |
| Abstract: | We revisit the relationship between market power and firms' investment incentives in a noncooperative differential oligopoly game in which firms sell differentiated goods and invest in advertising to increase the brand equity of their respective goods. The feedback equilibrium obtains under open-loop rules, and aggregate expenditure on goodwill takes an inverted-U shape under both Cournot and Bertrand behaviour, provided product differentiation is sufficiently high. Total industry expenditure is higher under Cournot competition. |
| JEL: | C73 L13 M37 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp954&r=bec |
| By: | Thorsten Beck (Cass Business School); Hans Degryse (Faculty of Economics and Business, KU Leuven); Ralph De Haas (EBRD); Neeltje van Horen (De Nederlandsche Bank) |
| Abstract: | Using a novel way to identify relationship and transaction banks, we study how banks’ lending techniques affect funding to SMEs over the business cycle. For 21 countries we link the lending techniques that banks use in the direct vicinity of firms to these firms’ credit constraints at two contrasting points of the business cycle. We show that relationship lending alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe. |
| Keywords: | Relationship banking, credit constraints, business cycle |
| JEL: | F36 G21 L26 O12 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:ebd:wpaper:169&r=bec |
| By: | KATO Atsuyuki |
| Abstract: | This paper examines the relationship between productivity, markups, and development of foreign markets using a rich firm-level dataset of the Japanese manufacturing industry during the period 2000-2010. Using estimates of firm-specific productivity and markups, we investigate if the development of foreign markets through exports has a premium for their market performance. Our study confirmed that exports have significant productivity and markup premiums. In addition, export premiums vary across the destination markets. Exports to Asia show a significant productivity premium while other markets do not. For markups, exports to Asia and North America have a significant premium. These findings imply that both productivity and markups should be considered in assessing the development of foreign markets. |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:14037&r=bec |
| By: | Juan Carlos Suárez Serrato; Owen Zidar |
| Abstract: | This paper estimates the incidence of state corporate taxes on workers, landowners, and firm owners in a spatial equilibrium model in which corporate taxes affect the location choices of both firms and workers. Heterogeneous, location-specific productivities and preferences determine the mobility of firms and workers, respectively. Owners of monopolistically competitive firms receive economic profits and may bear the incidence of corporate taxes as heterogeneous productivity can make them inframarginal in their location choices. We derive a simple expression for equilibrium incidence as a function of a few estimable parameters. Using variation in state corporate tax rates and apportionment rules, we estimate the reduced-form effects of tax changes on firm and worker location decisions, wages, and rental costs. We then use minimum distance methods to recover the parameters that determine equilibrium incidence as a function of these reduced-form effects. In contrast to previous assumptions of infinitely mobile firms and perfectly immobile workers, we find that firms are only approximately twice as mobile as workers over a ten-year period. This fact, along with equilibrium impacts on the housing market, implies that firm owners bear roughly 40% of the incidence, while workers and land owners bear 35% and 25%, respectively. Finally, we derive revenue-maximizing state corporate tax rates and discuss interactions with other local taxes and apportionment formulae. |
| JEL: | F22 F23 H2 H22 H25 H32 H71 J23 J3 R23 R30 R58 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20289&r=bec |
| By: | Marcia M Schafgans; Joachim Stibora |
| Abstract: | We develop a general equilibrium model of multiproduct fi�rms with quality differentiated goods. Households are characterized by an heterogeneous taste for the differentiated good and their income level. The use of non-homothetic preferences and vertical product differentiation (product quality) enables us to analyze how distributional changes in income affect the number of vertically differentiated �firms, their product range and prices in the presence of strategic interaction across �rms. The implications of lowering the barriers to trade within this setting are considered as well. |
| Keywords: | Multiproduct Firms, Endogenous Product Scope, Product Quality, Income Distribution, Discrete Choice , Trade Liberalization, Oligopoly, |
| JEL: | F12 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stieip:52&r=bec |