nep-bec New Economics Papers
on Business Economics
Issue of 2015‒12‒20
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Productivity, size and exporting dynamics of firms: Evidence for Mexico By Cardoso-Vargas, Carlos Enrique
  2. Product Dynamics and Aggregate Shocks: Evidence from Japanese product and firm level data By Robert DEKLE; KAWAKAMI Atsushi; KIYOTAKI Nobuhiro; MIYAGAWA Tsutomu
  3. How costly is corporate bankruptcy for the CEO? By Eckbo, B Espen; Thorburn, Karin S; Wang, Wei
  4. Endogenous firm entry in an estimated model of the US business cycle. Updated version By Offick, Sven; Winkler, Roland C.
  5. Women at the Top in Developing Countries: Evidence from Firm-Level Data By Khalid Sekkat; Ariane Szafarz; Ilan Tojerow
  6. Does CEO fitness matter? By Limbach, Peter; Sonnenburg, Florian
  7. Does the explanatory power of the OLI approach differ among sectors and business functions: Evidence from firm-level data By Arvanitis, Spyros; Hollenstein, Heinz; Stucki, Tobias
  8. Mixed Oligopoly and Privatization in General Equilibrium By Kenji Fujiwara
  9. Competition in Treasury Auctions By Elsinger, Helmut; Schmidt-Dengler, Philipp; Zulehner, Christine
  10. Identifying Heterogeneity in the Production Components of Globally Engaged Business Enterprises in the United States By James J. Fetzer; Erich H. Strassner
  11. Fractionalization and Entrepreneurial Activities By Awaworyi Churchill, Sefa
  12. US Health and Aggregate Fluctuations: Technical Appendix By Vasilev, Aleksandar
  13. Institutional distance and foreign direct investment. By R. Cezar; O. R. Escobar

  1. By: Cardoso-Vargas, Carlos Enrique
    Abstract: This paper examines the relationship between size and productivity on the export dynamics of a developing country like Mexico. The theoretical framework that guides the empirical evaluation is based on a simple model inspired by Melitz (2003). The results suggest that differences in size and productivity of firms indicate who will be able to internationalize and which markets can sell. According to estimates there are other feasible locations to replace the neighboring market of North America as the main buyer; however, the limiting factor for achieving this goal would be the low productivity of firms. In particular, it is that if transport costs are doubled, as is expected in destinations beyond the area of North America, would imply an increase in productivity of the firms of at least 9%. Finally, we find that the financial crisis caused a selection effect with respect to firms with higher productivity, while those firms that reported very low levels of productivity ceased its export activities
    Keywords: Productivity, international trade, heterogeneous firms
    JEL: D22 D24 F14
    Date: 2015–07–09
  2. By: Robert DEKLE; KAWAKAMI Atsushi; KIYOTAKI Nobuhiro; MIYAGAWA Tsutomu
    Abstract: We examine the effects of shocks to aggregate productivity, foreign output demand, government expenditures, and demand for foreign liquidity on dynamics of products and exports of heterogeneous firms. The framework is motivated by open economy general equilibrium models of Bilbie, Ghironi and Melitz (2012) and Dekle, Jeong and Kiyotaki (2014). We first construct unique firm level data on products and exports from the Census of Manufactures conducted by the Ministry of Economy, Trade and Industry. The data are more disaggregated than comparable U.S. data and available at the annual frequency (while U.S. product level data are only available at five-year intervals), which makes our data more suitable for examining the interaction between the business cycle and firm-product heterogeneity. Our empirical results show that the development of new products is stimulated by improvements in not only firm level productivity but also aggregate productivity. We also find that an increase in foreign demand and a shock to depreciate the home real exchange rate increase product dynamics and exports.
    Date: 2015–12
  3. By: Eckbo, B Espen; Thorburn, Karin S; Wang, Wei
    Abstract: We examine CEO career and compensation changes for firms filing for Chapter 11. One-third of the incumbent CEOs maintain executive employment, and these CEOs experience a median compensation change of zero. However, incumbent CEOs leaving the executive labor market suffer a compensation loss with a median present value until age 65 of $7 million (five times pre-departure compensation). The likelihood of leaving decreases with profitability and CEO share ownership. Furthermore, creditor control rights during bankruptcy (through debtor-in-possession financing and large trade credits) appear to effect CEO career change. Despite large equity losses (median $11 million for incumbents who stay until filing), the median incumbent does not reduce his stock ownership as the firm approaches bankruptcy.
    Keywords: career change; CEO compensation; labor market capital; personal bankruptcy costs; turnover; wealth loss
    JEL: G33 G34 M12
    Date: 2015–12
  4. By: Offick, Sven; Winkler, Roland C.
    Abstract: A recent theoretical literature highlights the role of endogenous firm entry as an internal amplification mechanism of business cycle fluctuations. The amplification mechanism works through the competition and the variety effect. This paper tests the significance of this amplification mechanism, quantifies its importance, and disentangles the competition and the variety effect. To this end, we estimate a medium-scale real business cycle model with firm entry for the U.S. economy. The competition and the variety effect are estimated to be statistically significant. Together, they amplify the volatility of output by 8.5 percent relative to a model in which both effects are switched off. The competition effect accounts for most amplification, whereas the variety effect only plays a minor role.
    Keywords: Bayesian estimation,Business Cycles,Competition Effect,Entry,Mark-ups,Variety Effect
    JEL: E20 E32
    Date: 2015
  5. By: Khalid Sekkat; Ariane Szafarz; Ilan Tojerow
    Abstract: This paper uses worldwide firm-level data to scrutinize the governance factors that favor gender diversity in leadership positions. Our results reveal that the gender of the dominant shareholder is key. The chief executive of firms with a female dominant shareholder has a significantly higher probability of being a woman than in other firms. The effect is even more pronounced when the female shareholder holds a higher share of the capital and when the firm is foreignowned. Our results suggest that “old boys’ club” ownership structures are a major impediment to the empowerment of female talent in developing countries.
    Keywords: Gender; diversity; ownership; leadership; CEO; development
    JEL: O15 J71 G32 M51 D21
    Date: 2015–12–07
  6. By: Limbach, Peter; Sonnenburg, Florian
    Abstract: This study provides evidence suggesting that CEOs' physical fitness has a positive impact on firm value, consistent with the beneficial effects of fitness on, e.g., cognitive functions, stress coping and job performance. For each of the years 2001 to 2011, we define S&P 1500 CEOs as fit if they finish a marathon. CEO fitness is also associated with higher firm profitability and higher M&A announcement returns. Our identification strategy includes CEO-firm fixed effects, instrumental variables, permutation tests, random effects, and time-varying CEO, firm and industry effects. An additional analysis of sudden CEO deaths, based on a fitness measure not limited to running, confirms our results.
    Keywords: CEO heterogeneity,firm value,mergers and acquisitions,physical fitness
    JEL: G32 G34 J24
    Date: 2015
  7. By: Arvanitis, Spyros; Hollenstein, Heinz; Stucki, Tobias
    Abstract: The relevance of services FDI strongly increased over the last two decades. As services and goods differ with respect to important characteristics, one may expect that the determinants of internationalisation are not identical in services and manufacturing. Surprisingly, there is practically no firm-level research contrasting the two sectors in this respect. In order to fill this gap, the authors aim at identifying for manufacturing and services, firstly, the determinants of a firm's propensity to engage in foreign activities (exports and/or FDI) and, secondly, the factors determining a firm's direct foreign presence in terms of (combinations of) business functions. The authors find that an OLI-based model is well suited for explaining not only the propensity to go international but also the differences between two specific forms of FDI in terms of business functions both for manufacturing and services. In all models, the explanatory power of the OLI approach is stronger for manufacturing than service activities. The results are consistent with the stages view of internationalisation in particular in manufacturing, but to a lesser extent also in services where the process of internationalization is less continuous.
    Keywords: manufacturing vs. services internationalisation,offshoring vs. exports,internationalisation of business functions,multinational companies,international business strategy
    JEL: F23
    Date: 2015
  8. By: Kenji Fujiwara (School of Economics, Kwansei Gakuin University)
    Abstract: Making use of a general oligopolistic equilibrium model with private and public firms, this paper examines the welfare effects of privatization. We show that in an exogenous market structure privatizing the public firm necessarily reduces welfare, which contrasts with the existing result that some degree of privatization is optimal. In contrast, we find that privatization has no effect on welfare in an endogenous market structure with free entry of private firms.
    Keywords: Partial privatization, General oligopolistic equilibrium, Exogenous market structure, Endogenous market structure
    JEL: L13 L32 L33
    Date: 2015–12
  9. By: Elsinger, Helmut; Schmidt-Dengler, Philipp; Zulehner, Christine
    Abstract: We investigate the role of competition on the outcome of Austrian Treasury auctions. Austria’s EU accession led to an increase in the number of banks participating in treasury auctions. We use structural estimates of bidders’ private values to examine the effect of increased competition on auction performance: We find that increased competition reduced bidder surplus substantially, but less than reduced form estimates would suggest. A significant component of the surplus reduction is due to more aggressive bidding. Counterfactuals establish that as competition increases, concerns regarding auction format play a smaller role.
    Keywords: competition; multiunit auctions; structural estimation; treasury auctions
    JEL: D43 D44
    Date: 2015–12
  10. By: James J. Fetzer; Erich H. Strassner (Bureau of Economic Analysis)
    Date: 2015–12
  11. By: Awaworyi Churchill, Sefa
    Abstract: The vast majority of the literature on ethnicity and entrepreneurship focuses on the construct of ethnic entrepreneurship. However, very little is known about how ethnic heterogeneity affects entrepreneurship. This study attempts to fill the gap, and thus examines the effect of ethnic heterogeneity on entrepreneurial activities in a cross-section of 90 countries. Using indices of ethnic and linguistic fractionalization, we show that ethnic heterogeneity negatively influences entrepreneurship. We argue that potential channels that can explain the negative effect of fractionalization on entrepreneurship include trust, social network, social capital, innovation, and discrimination among others. Results are robust to several checks.
    Keywords: entrepreneurship,ethnic diversity,fractionalization
    Date: 2015–12–07
  12. By: Vasilev, Aleksandar
    Keywords: RBC,health
    JEL: D91
    Date: 2015
  13. By: R. Cezar; O. R. Escobar
    Abstract: This paper studies the link between foreign direct investment (FDI) and institutional distance. Using a heterogeneous firms framework, we develop a theoretical model to explain how institutional distance influences FDI, and it is shown that institutional distance reduces both the likelihood that a firm will invest in a foreign country and the volume of investment it will undertake. We test our model using inward and outward FDI data on OECD countries. The empirical results confirm the theory and indicate that FDI activity declines with institutional distance. In addition, we find that firms from developed economies adapt more easily to institutional distance than firms from developing economies.
    Keywords: SForeign direct investment, Institutions, Heterogeneous firms, Gravity model.
    JEL: F12 F23 H80 K20
    Date: 2015

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