nep-bec New Economics Papers
on Business Economics
Issue of 2015‒09‒11
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Capital Market Financing, Firm Growth, and Firm Size Distribution By Tatiana Didier; Ross Levine; Sergio L. Schmukler
  2. Global dollar credit and carry trades: a firm-level analysis By Valentina Bruno; Hyun Song Shin
  3. A Coasian Model of International Production Chains By Thibault Fally; Russell Hillberry
  4. Innovation, Deregulation, and the Life Cycle of a Financial Service Industry By Fumiko Hayashi; Grace Bin Li; Zhu Wang
  5. Does Public Sector Inefficiency Constrain Firm Productivity: Evidence from Italian Provinces By Raffaela Giordano; Sergi Lanau; Pietro Tommasino; Petia Topalova
  6. Trade Integration, Welfare, and Horizontal Multinationals: A three-country model By Fabio CERINA; MORITA Tadashi; YAMAMOTO Kazuhiro
  7. Team Incentives and Performance: Evidence from a Retail Chain By Friebel, Guido; Heinz, Matthias; Krüger, Miriam; Zubanov, Nikolay
  8. Financial Factors: Implications for Output Gaps By Pau Rabanal; Marzie Taheri Sanjani
  9. Advancing the Human Capital Perspective on Value Creation by Joining Capabilities and Governance Approaches By Mahoney, Joseph T.; Kor, Yasmine
  10. Determinants of Firm Profitability in Colombia’s Manufacturing Sector: Exchange Rate or Structural? By Naomi Griffin
  11. Information exchange through non-binding advance price announcements: An antitrust analysis By Boshoff, Willem; Frübing, Stefan; Hüschelrath, Kai
  12. Technology, Policy Distortions and the Rise of Large Farms By Wenbiao Cai
  13. Product Line Strategy in a Vertically Di¤erentiated Duopoly By Ryoma Kitamura; Tetsuya Shinkai

  1. By: Tatiana Didier (World Bank); Ross Levine (University of California at Berkeley and National Bureau of Economic Research); Sergio L. Schmukler (World Bank and Hong Kong Institute for Monetary Research)
    Abstract: How many and which firms issue equity and bonds in domestic and international markets, how do these firms grow relative to non-issuing firms, and how does firm performance vary along the firm size distribution (FSD)? To evaluate these questions, we construct a new dataset by matching data on firm-level capital raising activity with balance sheet data for 45,527 listed firms in 51 countries. Three main patterns emerge from the analysis. (1) Only a few large firms issue equity or bonds, and among them a small subset has raised a large proportion of the funds raised during the 1990s and 2000s. (2) Issuers grow faster than non-issuers in terms of assets, sales, and employment, that is, firms do not simply use securities markets to adjust their financial accounts. (3) The FSD of issuers evolves differently from that of non-issuers, tightening among issuers and widening among non-issuers.
    Keywords: Access to Finance, Bond Markets, Capital Market Development, Capital Raisings, Firm Dynamics, Firm Financing, Stock Markets
    JEL: G00 G10 G31 G32 L25
    Date: 2015–08
  2. By: Valentina Bruno; Hyun Song Shin
    Abstract: We conduct a firm-level analysis of borrowing in US dollars by non-financial corporates from outside the United States. The dataset combines bond issuance data with firm-level financial information. We find that firms with already high cash holdings are more likely to issue US dollar-denominated bonds, and that the proceeds of the bond issue add to cash holdings. The tendency to add cash is more pronounced during periods when the dollar carry trade is more favourable and is prevalent for emerging market firms.
    Keywords: emerging markets, bond issuance, surrogate intermediaries
    Date: 2015–08
  3. By: Thibault Fally; Russell Hillberry
    Abstract: International supply chains require coordination of numerous activities across multiple countries and firms. We develop a theoretical model of supply chains in which the measure of tasks completed within a firm is determined by parameters that define transaction costs and the cost of coordinating more activities within the firm. The structural parameters that govern these costs explain variation in supply chain length as well as cross-country variation in gross-output-to-value-added ratios. The structural parameters are linked to comparative advantage along and across supply chains. We provide an analytical treatment of trade and welfare responses to trade cost change in a simple two-country model. To explore the model's implications in a richer setting we calibrate the model to match key observables in East Asia, and evaluate implications of changes in model parameters for trade, welfare, the length of supply chains and countries' relative position within them.
    JEL: F10 L23
    Date: 2015–09
  4. By: Fumiko Hayashi; Grace Bin Li; Zhu Wang
    Abstract: This paper examines innovation, deregulation, and firm dynamics over the life cycle of the U.S. ATM and debit card industry. In doing so, we construct a dynamic equilibrium model to study how a major product innovation (introducing the new debit card function) interacted with banking deregulation drove the industry shakeout. Calibrating the model to a novel dataset on ATM network entry, exit, size, and product offerings shows that our theory fits the quantitative pattern of the industry well. The model also allows us to conduct counterfactual analyses to evaluate the respective roles that innovation and deregulation played in the industry evolution.
    Keywords: Financial services industry;United States;Industrial structure;Technological innovation;Equilibrium. Econometric models;Innovation; Deregulation; Industry Dynamics; Shakeout
    Date: 2015–08–18
  5. By: Raffaela Giordano; Sergi Lanau; Pietro Tommasino; Petia Topalova
    Abstract: This paper studies the effect of public sector efficiency on firm productivity using data from more than 400,000 firms across Italy’s provinces. Exploiting the large heterogeneity in the efficiency of the public sector across Italian provinces and the intrinsic variation in the dependence of industries on the government, we find that public sector inefficiency significantly reduces the labor productivity of private sector firms. The results suggest that raising public sector efficiency could yield large economic benefits: if the efficiency in all provinces reached the frontier, output per employee for the average firm would increase by 9 percent.
    Keywords: Italy;public sector efficiency, firm productivity, public, public sector, government, General
    Date: 2015–07–21
  6. By: Fabio CERINA; MORITA Tadashi; YAMAMOTO Kazuhiro
    Abstract: In this paper, we construct a three-country model with national and multinational (multi-plant) firms, in which oligopolistic firms in each country export their goods to other countries. We investigate the effects of trade liberalization between two countries on the third country. When the fixed costs of foreign direct investment (FDI) are sufficiently large, the firm does not conduct FDI, and trade liberalization always reduces the welfare level of the third country. When the fixed costs of FDI are small, trade liberalization may improve the welfare level of the third country. In addition, we observe cases under which trade liberalization between two of the countries improves the welfare of all three countries. In those cases, the two countries have incentives to join a free trade agreement (FTA), while the third country has no incentive to do so.
    Date: 2015–09
  7. By: Friebel, Guido (Goethe University Frankfurt); Heinz, Matthias (University of Cologne); Krüger, Miriam (Goethe University Frankfurt); Zubanov, Nikolay (Goethe University Frankfurt)
    Abstract: We test the effectiveness of team incentives by running a natural field experiment in a retail chain of 193 shops and 1,300 employees. As a response to intensified product market competition, the firm offered a bonus to shop teams for surpassing sales targets. A bonus to teams rather than individuals was a natural choice because the firm does not measure individual performance and relies on flexible task allocation among employees. On average, the team bonus increases sales and customer visits in the treated shops by around 3%, and wages by 2.3%. The bonus is highly profitable for the firm, generating for each bonus dollar an extra $3.80 of sales, and $2.10 of operational profit. The results show the importance of complementarities within teams and suggest that improved operational efficiency is the main mechanism behind the treatment effect. Our analysis of heterogeneous treatment effects offers a number of insights about the anatomy of teamwork. The firm decided to roll out the bonus to all of its shops, and the performance of treatment and control shops converged after the roll-out.
    Keywords: management practices, randomized controlled trial (RCT), natural field experiment, insider econometrics
    JEL: J3 L2 M5
    Date: 2015–08
  8. By: Pau Rabanal; Marzie Taheri Sanjani
    Abstract: We suggest a new approach for analyzing the role of financial variables and shocks in computing the output gap. We estimate a two-region DSGE model for the euro area, with financial frictions at the household level, between 2000-2013. After joining the monetary union, a decline in some countries’ borrowing costs contributed to a credit, housing and real boom and bust cycle. We show that financial frictions amplified economic fluctuations and the measure of the output gap in those countries. On the contrary, in countries such as France and Germany, financial frictions played a minor role in output gap measures. We also present evidence of the trade-offs faced by the European Central Bank when trying to stabilize two regions in a currency union with unsynchronized economic cycles.
    Date: 2015–07–14
  9. By: Mahoney, Joseph T. (University of IL); Kor, Yasmine (University of SC)
    Abstract: This paper elaborates on how the human capital perspective on value creation can be advanced by joining the capabilities and governance approaches. Investments in firm-specific human capital can be an important pathway to building and enhancing a firm's core competencies. Thus, it is vital to build mechanisms and systems that encourage the development and safeguarding of these human capital-based capabilities. Our paper unpacks the notion of firm-specific human capital and presents a view on why this form of human capital especially matters in today's business context. We review pitfalls and shortcomings of a traditional shareholder model and its likely impacts on investments in firm-specific human capital. Finally, we discuss mechanisms by which the firm-specific human capital development process can be stimulated and protected.
    Date: 2014
  10. By: Naomi Griffin
    Abstract: The appreciation of the real exchange rate over the past several years is considered one of the key drivers behind the weak performance of Colombia’s manufacturing sector in recent years. This paper examines the effects of the real exchange rate, external and domestic demand, and structural changes on firms’ profitability in Colombia’s manufacturing sector between 2000 and 2012. While export intensive companies have suffered lower profit growth with real exchange rate appreciation,we find no strong evidence that real appreciation has, on average, negatively affected the profitability of manufacturing firms; on the contrary, we find that real appreciation may have increased firms’ profitability by reducing the cost of imported inputs as Colombian manufacturing firms become more domestically oriented. At the same time, some structural changes (related to trade disruption with Venezuela and increased trade competition from China) seem to partially explain the weakness of the manufacturing sector since 2008.
    Keywords: Exchange rate appreciation;Colombia;Colombia;Econometric models;Manufacturing sector;Manufacturing;Profits;Real effective exchange rates;Real exchange rate, structural changes, exchange rate, imports, demand, real effective exchange rate, Firm Performance: Size, Diversification, and Scope, General,
    Date: 2015–05–04
  11. By: Boshoff, Willem; Frübing, Stefan; Hüschelrath, Kai
    Abstract: We study the welfare effects of non-binding advance price announcements. Applying a differentiated Bertrand model with horizontal products and asymmetric information, we find that such announcements can help firms to gain information on each other thereby allowing them to achieve higher profits. However, our results also show that the overall welfare effects of such announcements in a context of heterogeneous products are not as clear-cut as previous research in a homogeneous products framework has suggested. We conclude that - although non-binding advance price announcements may raise competition concerns - in many settings, their positive effects are likely to outweigh the potential detrimental effects on welfare.
    Keywords: antitrust policy,collusion,information exchange,price announcements
    JEL: L41 K21
    Date: 2015
  12. By: Wenbiao Cai
    Abstract: Between 1900 and 2002, mean farm size in the U.S. quadrupled. The increasing dominance of large farms has raised concerns about inequality and questions about the role of policies in fueling this trend. I construct a two-sector model with an endogenous size distribution of farms, and use the model to show that factor endowment and technological change cannot fully account for long-term changes in farm size. Utilizing a novel set of farm-level statistics constructed from historical census of agriculture, I further show that policy distortions to farm size are regressive and are crucial for the rise of large farms.
    Date: 2015–08
  13. By: Ryoma Kitamura (Graduate School of Economics, Kwansei Gakuin University); Tetsuya Shinkai (School of Economics, Kwansei Gakuin University)
    Abstract: We consider a duopoly model in which …rms with di¤erent costs supply two vertically di¤erentiated products in the same market. We show that the e¢ cient …rm produces more of the high-quality good and the ine¢ cient one produces more of the low-quality good in equilibrium. We also …nd that a change in the quality superiority of goods and relative cost e¢ ciency ratios leads to cannibalization from one good to the other and characterize graphically the product line strategies of …rms through the two ratios.
    Keywords: Multi-product …rm; Duopoly; Cannibalization; Vertical product di¤erentiation
    JEL: D21 D43 L13 L15
    Date: 2015–08

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