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on Business Economics |
| By: | Hottman, Colin; Redding, Stephen J.; Weinstein, David E. |
| Abstract: | We estimate a structural model of heterogeneous multiproduct firms to examine the sources of firm heterogeneity emphasized in the recent trade and macro literatures. Using Nielsen barcode data on prices and sales, we estimate elasticities of substitution within and between firms, and use the estimated model to recover unobserved qualities, marginal costs and markups. We find that variation in firm quality and product scope explains at least four fifths of the variation in firm sales. Most firms are well approximated by the monopolistic competition benchmark of constant markups, but the largest firms that account for most of aggregate sales depart substantially from this benchmark. Although the output of multiproduct firms is differentiated, cannibalization is quantitatively important for the largest firms. This imperfect substitutability of products within firms, and the fact that larger firms supply more products than smaller firms, implies that standard productivity measures are not independent of demand system assumptions and probably dramatically understate the relative productivity of the largest firms. |
| Keywords: | cannibalization effects; firm heterogeneity; multiproduct firms; productivity |
| JEL: | L11 L21 L25 L60 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10133&r=bec |
| By: | Mauricio Jara-Bertin; Jean P. Sepulveda (School of Business and Economics, Universidad del Desarrollo) |
| Abstract: | This study introduces an earnings management dimension to compute premanipulated accounting performance to determine whether family-controlled firms have higher performance relative to non-family-controlled firms. Using a premanipulated return on assets measure for Chilean firms dataset, we find that the premanipulated performance of familycontrolled firms is superior to that of non-family-controlled firms. We also show that the presence of institutional investors in the firm’s ownership structure has a positive influence on performance of family companies. The results suggest that earnings management behavior is not sufficient to explain the higher performance of family-controlled firms that has been reported in the literature. |
| Keywords: | Family-controlled firms, earnings management, accounting performance. |
| JEL: | G32 G34 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:dsr:wpaper:01&r=bec |
| By: | Daniela MAGGIONI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Alessia LO TURCO (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Mauro GALLEGATI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali) |
| Abstract: | With this paper we provide, for the first time to our knowledge, micro-level evidence on the negative linkage between firm complexity and volatility. A higher sophistication level of a firm's export basket reduces its output fluctuations. When focusing on a sample of exporting and non exporting firms, the average complexity of the production mix equally affects stability of sales of both groups. The stabilising role of firms' production sophistication is driven by complex products' higher income elasticity, technological diversification and market entry barriers. |
| Keywords: | Capabilities, Demand and supply channels, Output fluctuations, Product Sophistication |
| JEL: | D22 E32 F43 O12 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wpaper:407&r=bec |
| By: | Limbach, Peter; Sonnenburg, Florian |
| Abstract: | We find that CEO fitness positively affects firm value (Tobin's Q). For each of the years 2001 to 2011, we define S&P 1500 CEOs as fit if they finish a marathon. Fit CEOs are associated with higher firm profitability and M&A announcement returns. Effects on firm value are strongest for CEOs with above-median age, above-median tenure and high workload, consistent with the positive impact of fitness on cognitive functions, performance and stress coping found in the literature. Our findings are robust to various tests for endogeneity, including CEOfirm fixed effects, time-varying firm and industry effects, reverse causality, permutation tests, and CEO sudden deaths. Results can explain the importance of fitness in the labor market and the trend among CEOs to stay fit. |
| Keywords: | CEO fitness,CEO heterogeneity,firm profitability and value,mergers and acquisitions,stress and workload |
| JEL: | G32 G34 J24 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1412r&r=bec |
| By: | Lisa B. Kahn; Erika McEntarfer |
| Abstract: | Who fares worse in an economic downturn, low- or high-paying firms? Different answers to this question imply very different consequences for the costs of recessions. Using U.S. employer-employee data, we find that employment growth at low-paying firms is less cyclically sensitive. High-paying firms grow more quickly in booms and shrink more quickly in busts. We show that while during recessions separations fall in both high-paying and low-paying firms, the decline is stronger among low-paying firms. This is particularly true for separations that are likely voluntary. Our findings thus suggest that downturns hinder upward progression of workers toward higher paying firms - the job ladder partially collapses. Workers at the lowest paying firms are 20% less likely to advance in firm quality (as measured by average pay in a firm) in a bust compared to a boom. Furthermore, workers that join firms in busts compared to booms will on average advance only half as far up the job ladder within the first year, due to both an increased likelihood of matching to a lower paying firm and a reduced probability of moving up once matched. Thus our findings can account for some of the lasting negative impacts on workers forced to search for a job in a downturn, such as displaced workers and recent college graduates. |
| JEL: | E24 E32 J23 J3 J63 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20698&r=bec |
| By: | Hervas-Oliver,Jose-Luis; Sempere-Ripoll,Francisca |
| Abstract: | Agglomeration can generate gains. If it does, how does it work and how are those gains distributed across agglomerated firms? Despite the existence of an important body of research on this topic, the evidence is inconclusive. We examine the effect of localization externalities on a firm’s innovativeness. By analyzing a large dataset of 6,697 firms integrated with another regional agglomeration-related dataset, we obtain results which show that (i) location in an agglomeration has a positive influence on a firm’s absorptive capacity and innovativeness, and, (ii) firms benefit heterogeneously from being located in agglomerations, with benefits being distributed asymmetrically. Agglomeration gains exist but not all firms benefit equally: the least innovative firms gain the most. |
| Keywords: | agglomeration, localization externalities, innovation, performance |
| JEL: | M1 |
| Date: | 2014–11–27 |
| URL: | http://d.repec.org/n?u=RePEc:ing:wpaper:201411&r=bec |
| By: | Fernandes, Ana; Ferreira, Priscila; Winters, L. Alan |
| Abstract: | This paper studies the effect of competition on executive compensation. We estimate the effect of increased product market competition on the performance-pay sensitivity of CEOs, and contrast it with the effect for department managers and other workers in the corporation. We use a recent reform that simplified firm entry regulation in Portugal as a quasi-natural experiment. The empirical strategy exploits the staggered implementation of the reform across municipalities. Using linked employer-employee data for the universe of workers and firms, we show that increased product market competition, following the reform, decreased the sensitivity of pay to performance of CEOs, with no significant effects found for other managers or workers. These findings are consistent with existing theoretical results in a principal-agent framework that a fall in entry costs leads to weaker managerial incentives. |
| Keywords: | entry deregulation; executive compensation; performance-related pay; product market competition |
| JEL: | J31 J33 M52 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10054&r=bec |
| By: | Javier Andrés (University of Valencia); Pablo Burriel (Banco de España) |
| Abstract: | We analyse the incidence of endogenous entry and firm TFP-heterogeneity on the response of aggregate inflation to exogenous shocks. We build up an otherwise standard DSGE model in which the number of firms is endogenously determined and firms differ in their steady state level of productivity. This splits the industry structure into firms of different sizes. Calibrating the different transition rates, across firm sizes and out of the market we reproduce the main features of the distribution of firms in Spain. We then compare the inflation response to technology, interest rate and entry cost shocks, among others. We find that structures in which large (more productive) firms predominate tend to deliver more muted inflation responses to exogenous shocks. |
| Keywords: | firm dynamics, industrial structure, inflation, business cycles. |
| JEL: | E31 E32 L11 L16 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1429&r=bec |
| By: | Geiler, P.H.M. (Tilburg University, Center For Economic Research); Renneboog, L.D.R. (Tilburg University, Center For Economic Research) |
| Abstract: | Abstract: Are female top managers paid less than their male counterparts? Is the gender gap higher in male-dominated industries? What effect on pay do female non-executive directors and remuneration consultants exert? While we find no pay gap for the figure-head (CEO), there is strong pay discrimination at the level of the other top managers. These female executive directors earn over a five-year tenure period £1.3 million less than male directors, and this pay gap is visible for all components of pay. The pay gap is lower for executives in firms with one or more female non-executives. Female executives in ‘male’ industries receive less remuneration than male executives but the gender pay gap is smaller. The advice of top remuneration consultants does not reduce the pay gap. |
| Keywords: | executive compensation; gender pay gap; gender discrimination; pay-for-performance; glass ceiling; glass cliff |
| JEL: | J31 J33 M52 G30 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:fcd642f1-0ea8-481d-b6d9-d47e3242f5d0&r=bec |
| By: | Halac, Marina; Prat, Andrea |
| Abstract: | We study a dynamic agency problem with two-sided moral hazard: the worker chooses whether to exert effort or shirk; the manager chooses whether to invest in an attention technology to recognize worker performance. In equilibrium the worker uses past recognition to infer managerial attention. An engagement trap arises: absent recent recognition, both worker effort and managerial investment decrease, making a return to high productivity less likely as time passes. In a sample of ex-ante identical firms, firm performance, managerial quality, and worker engagement display heterogeneity across firms, positive correlation, and persistence over time. |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10035&r=bec |
| By: | Misani, Nicola; Pogutz, Stefano |
| Abstract: | We examine the roles of the outcome and process dimensions of environmental performance in determining financial performance as measured by Tobin’s q. Outcomes refer to the impacts of the firm on the natural environment, while processes are the firm’s actions to reduce these outcomes. We focus on a specific outcome—carbon emissions—and suggest that it affects Tobin’s q non-linearly. We find that firms achieve the highest financial performance when their carbon performance is neither low nor high, but intermediate. We also find that environmental processes moderate this relationship as they reinforce firms’ financial performance through improved stakeholder management. This mixed picture suggests that firms do not generally internalize the costs of poor carbon performance, but those that stand out in both environmental outcomes and processes achieve net financial benefits. These findings are based on a sample of carbon-intensive firms that disclosed their greenhouse gas (GHG) emissions through the Carbon Disclosure Project from 2007 through 2013. |
| Keywords: | GHG emissions; climate change; environmental management; financial performance; Tobin’s q |
| JEL: | C21 L20 M13 Q20 |
| Date: | 2014–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:60359&r=bec |
| By: | Matthias Kräkel and Daniel Müller |
| Abstract: | We consider a two-stage principal-agent model with limited liability in which a CEO is employed as agent to gather information about suitable merger targets and to manage the merged corporation in case of an acquisition. Our results show that the CEO systematically recommends targets with low synergies—even when targets with high synergies are available—to obtain high-powered incentives and, hence, a high personal income at the merger-management stage. |
| Keywords: | acquisition; merger; moral hazard |
| JEL: | D82 D86 G34 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse02_2014&r=bec |
| By: | Atkin, David; Khandelwal, Amit; Osman, Adam |
| Abstract: | We conduct a randomized control trial that generates exogenous variation in the access to foreign markets for rug producers in Egypt. Combined with detailed survey data, we causally identify the impact of exporting on firm performance. Treatment firms report 15-25 percent higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms. These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, we find evidence of learning-by-exporting whereby exporting improves technical efficiency. First, treatment firms have higher productivity and quality after accounting for rug specifications. Second, when asked to produce an identical domestic rug using the same inputs, treatment firms receive higher quality assessments despite no difference in production time. Third, treatment firms exhibit learning curves over time. Finally, we document knowledge transfers with quality increasing most along the specific dimensions that the knowledge pertained to. |
| Keywords: | exports; learning-by-exporting; market access; productivity; quality |
| JEL: | D24 F10 F14 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10276&r=bec |
| By: | Roberto Ganau; Eleonora Di Maria |
| Abstract: | The study of the determinants of innovation processes has received great attention in both the economics and the business literature. However, only few contributions have proposed a comprehensive framework able to bring together different but not mutually exclusive research approaches. This paper contributes to the analysis of the determinants of technological innovation - namely, product and process innovations - focusing on Italian manufacturing small and medium sized firms (SMEs) by accounting, simultaneously, for firm-specific characteristics, agglomeration economies and the role of KIBS providers. Specifically, the paper provides an empirical investigation which is built on a multi-dimensional theoretical basis which gathers the resource-based view of the firm and the new economic geography framework together. The empirical exercise employs data of about 4,000 Italian SMEs observed over the period 2004-2006 and drawn from the Unicredit-Capitalia database. Parametric probabilistic models are estimated in order to identify the joint effects of several potential determinants of successful technological innovation. Overall, results suggest that technological innovation in manufacturing SMEs is mainly driven by firm-specific characteristics. It emerges that experience and knowledge accumulated over time (i.e. age) as well as availability of human and capital resources (i.e. size) matter for being innovative firms. Moreover, innovative firms show both higher labour productivity levels and higher investments in R&D activities than non-innovative firms. Results partially support previous findings on the agglomeration-innovation relationship: overall, diversification (specialisation) externalities seem to positively (negatively) affect (high-tech) firms' probability of introducing technological innovations. Finally, results suggest that the spatial agglomeration of KIBS providers - i.e. being located in an area characterised by a high concentration of KIBS firms - does not matter per se: in fact, a positive effect emerges only when firms' heterogeneity in absorptive capacity is explicitly considered. Results show that only (low-tech) SMEs which invest in R&D activities benefit from a high geographic concentration of (professional and technological) KIBS firms. |
| Keywords: | Technological innovation; Manufacturing SMEs; Resource-Based Theory; Agglomeration Economies; KIBS providers; Italy; |
| JEL: | D22 O31 R12 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa14p820&r=bec |