nep-bec New Economics Papers
on Business Economics
Issue of 2014‒08‒28
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Firm Leverage and the Financial Crisis By Fatih Altunok; Arif Oduncu
  2. A note on firm age and the margins of exports: First evidence from Germany By Wagner, Joachim
  3. The growth potential of startups over the business cycle By Vincent Sterk; Petr Sedlacek
  4. Professors in the boardroom and their impact on corporate governance and firm performance By Francis, Bill B.; Hasan, Iftekhar; Wu, Qiang
  5. Firm Entry and Employment Dynamics in the Great Recession By Siemer, Michael
  6. Heterogeneous Tax Sensitivity of Firm-level Investments By Egger, Peter; Erhardt, Katharina; Keuschnigg, Christian
  7. A note on quality of a firm’s exports and distance to destination countries: First evidence from Germany By Wagner, Joachim
  8. How Does the Market Value Organizational Management Practices of Japanese Firms? Using interview survey data By KAWAKAMI Atsushi; ASABA Shigeru
  9. On the Multiplicity of Equilibrium Strategies in a Non-Renewable Natural Resource Duopoly By Rémi Morin-Chassé; Markus Herrmann
  10. Determinants of self-reporting under the European corporate leniency program By Hoang, Cung Truong; Hüschelrath, Kai; Laitenberger, Ulrich; Smuda, Florian
  11. Dynamic Selection: An Idea Flows Theory of Entry, Trade and Growth By Thomas Sampson
  12. Liquidity Premia, Price-Rent Dynamics, and Business Cycles By Jianjun Miao; Pengfei Wang; Tao Zha

  1. By: Fatih Altunok; Arif Oduncu
    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
    JEL: G30 G32
    Date: 2014
  2. By: Wagner, Joachim (Leuphana University Lueneburg, Germany, Royal Institute of Technology (KTH), and Centre of Excellence for Science and Innovation Studies (CESIS), Stockholm, Sweden)
    Abstract: This note uses a new tailor-made data set to investigate the link between firm age and the extensive and intensive margins of exports empirically for the first time for Germany. Results turn out to be fully in line with the theoretical considerations. Older firms are more often exporters, export more and more different goods to more different destination countries, and export to more distant destination markets.
    Keywords: Exports; firm age; export margins; Germany
    JEL: F14
    Date: 2014–07–24
  3. By: Vincent Sterk (University College London); Petr Sedlacek (Bonn University)
    Abstract: This paper shows that job creation of cohorts of U.S. firms is strongly influenced by aggregate conditions at the time of their entry. Using data from the Business Dynamics Statistics (BDS) we follow cohorts of young firms and document that their employment levels are very persistent and largely driven by the intensive margin (average firm size) rather than the extensive margin (number of firms). To differentiate changes in the composition of startup cohorts from post-entry choices and to evaluate aggregate effects, we estimate a general equilibrium firm dynamics model using BDS data. We find that even for older firms, the aggregate state at birth drives the vast majority of variations in employment across cohorts of the same age. The key force behind this result is fluctuation in choices made by startups that determine their potential to grow large. At the aggregate level, startup decisions account for the large low-frequency fluctuations observed in the employment rate.
    Date: 2014
  4. By: Francis, Bill B. (Lally School of Management, Rensselaer Polytechnic Institute); Hasan, Iftekhar (Fordham University and Bank of Finland); Wu, Qiang (Lally School of Management, Rensselaer Polytechnic Institute)
    Abstract: Directors from academia served on the boards of around 40% of S&P 1,500 firms over the 1998–2011 period. This paper investigates the effects of academic directors on corporate governance and firm performance. We find that companies with directors from academia are associated with higher performance and this relation is driven by professors without administrative jobs. We also find that academic directors play an important governance role through their advising and monitoring functions. Specifically, our results show that the presence of academic directors is associated with higher acquisition performance, higher number of patents and citations, higher stock price informativeness, lower discretionary accruals, lower CEO compensation, and higher CEO forced turnover-performance sensitivity. Overall, our results provide supportive evidence that academic directors are valuable advisors and effective monitors and that, in general, firms benefit from having academic directors.
    Keywords: academic directors; professors; firm performance; advising; monitoring
    JEL: G30 G34 M41
    Date: 2014–07–09
  5. By: Siemer, Michael (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: The 2007-2009 recession is characterized by: a large drop in employment, an unprecedented decline in firm entry, and a slow recovery. Using confidential firm-level data, I show that financial constraints reduced employment growth in small relative to large firms by 4.8 to 10.5 percentage points. The effect of financial constraints is robust to controlling for aggregate demand and is particularly strong in small young firms. I show in a heterogeneous firms model with endogenous firm entry and financial constraints that a large financial shock results in a long-lasting recession caused by a "missing generation" of entrants.
    Keywords: Employment; firm entry; financial crisis; small business; financial friction; slow recovery; start-ups
    JEL: E24 E32 E44 G01 J20 L25
    Date: 2014–07–30
  6. By: Egger, Peter; Erhardt, Katharina; Keuschnigg, Christian
    Abstract: Firms are heterogeneous in size, productivity, ownership concentration, governance, financial structure and other dimensions. This paper introduces a stylized theoretical framework to account for such differences and to explain the heterogeneous tax sensitivity of firm-level investments across firm types. We econometrically test the theoretical predictions, taking account of selection of firms into different regimes. We find important differences in the tax sensitivity of investment of small entrepreneurial and larger managerial firms in different financial regimes that are largely in line with theoretical results.
    Keywords: Corporate tax; Personal taxes; Firm heterogeneity; Access to capital; Manager-shareholder conflicts
    JEL: D22 G32 H25 L21
    Date: 2014–08
  7. By: Wagner, Joachim (Leuphana University Lueneburg, Germany, Royal Institute of Technology (KTH), and Centre of Excellence for Science and Innovation Studies (CESIS), Stockholm, Sweden)
    Abstract: This note uses a tailor-made new data set to investigate for the first time the link between the quality of a firm’s exports and the distance to destination countries for Germany. To anticipate the most important result, it is shown that the quality of exported goods and the distance to destination countries are not statistically positively correlated.
    Keywords: Exports; export quality; distance; Germany
    JEL: F14
    Date: 2014–07–24
  8. By: KAWAKAMI Atsushi; ASABA Shigeru
    Abstract: This paper examines the extent to which a firm's management practices are valued in the marketplace using the interview survey data which are comparable with that in Bloom and Van Reenen (2007). Kawakami and Asaba (2013) use the same interview data and find that among various management practices, human resources management has a significantly positive impact on Tobin's q, while some of the organizational management variables have a significantly negative impact. The latter result is contrary to Bloom and Van Reenen (2007; 2010; 2012). This paper tries to examine the relationship in more detail between organizational management practice and Tobin's q. We use the raw answers for calculating the organizational management score instead of the organizational management score itself. The detailed analysis suggests three characteristics of management practices: (i) Information sharing and coordination within a unit or a team increases the firm value, while disclosure of information and coordination across units decreases the value; (ii) The impact of quick decision making on a firm's market value varies depending upon the contexts; (iii) Speedy decision making increases the value in the case of new business development, while consultation with the people concerned increases a firm's market value in the case of closing an existing business.
    Date: 2014–08
  9. By: Rémi Morin-Chassé; Markus Herrmann
    Abstract: We identify two possible equilibrium configurations for a non-renewable resource duopoly in a discrete-time framework. For the purpose of illustration, we suppose initial endowments of firms that allow for a maximum of two extraction periods. In the first possible equilibrium, the duopoly exists for two periods, while in the second possible equilibrium, the duopoly lasts only for one period and the firm with the higher initial endowment becomes a monopolist in the second and last period. As neither equilibrium configuration dominates the other for both firms at the same time, it is unclear whether firms acting simultaneously can coordinate on one particular configuration.
    Keywords: Open-loop equilibrium, closed-loop equilibrium, duopoly, non-renewable resource
    JEL: Q30 D43
    Date: 2014
  10. By: Hoang, Cung Truong; Hüschelrath, Kai; Laitenberger, Ulrich; Smuda, Florian
    Abstract: We empirically investigate the determinants of self-reporting under the European corporate leniency program. Applying a data set consisting of 442 firm groups that participated in 76 cartels decided by the European Commission between 2000 and 2011, we find that the probability of a firm becoming the chief witness increases with its character as repeat offender, the size of the expected basic fine, the number of countries active in one group as well as the size of the firm's share in the cartelized market. Our results have important implications for an effective prosecution of anti-cartel law infringers. --
    Keywords: Competition policy,cartels,leniency,European Union
    JEL: L41 K21
    Date: 2014
  11. By: Thomas Sampson
    Abstract: This paper develops an idea flows theory of trade and growth with heterogeneous firms. New firms learn from incumbent firms, but the diffusion technology ensures entrants learn not only from frontier technologies, but from the entire technology distribution. By shifting the productivity distribution upwards, selection on productivity causes technology diffusion and this complementarity generates endogenous growth without scale effects. On the balanced growth path, the productivity distribution is a traveling wave with an increasing lower bound. Growth of the lower bound causes dynamic selection. Free entry mandates that trade liberalization increases the rates of technology diffusion and dynamic selection to offset the profits from new export opportunities. Consequently, trade integration raises long-run growth. The dynamic selection effect is a new source of gains from trade not found when firms are homogeneous. Calibrating the model implies that dynamic selection approximately triples the gains from trade relative to heterogeneous firm economies with static steady states.
    Keywords: International trade, firm heterogeneity, technology diffusion, endogenous growth
    JEL: F12 O41
    Date: 2014–08
  12. By: Jianjun Miao; Pengfei Wang; Tao Zha
    Abstract: In the U.S. economy over the past twenty five years, house prices exhibit fluctuations considerably larger than house rents and these large fluctuations tend to move together with business cycles. We build a simple theoretical model to characterize these observations by showing the tight connection between price-rent fluctuation and the liquidity constraint faced by productive firms. After developing economic intuition for this result, we estimate a medium-scale dynamic general equilibrium model to assess the empirical importance of the role the price-rent fluctuation plays in the business cycle. According to our estimation, a shock that drives most of the price-rent fluctuation explains $30% of output fluctuation over a six-year horizon.
    JEL: E22 E32 E44
    Date: 2014–08

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