nep-bec New Economics Papers
on Business Economics
Issue of 2016‒06‒09
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Relative peer quality and firm performance By Francis, Bill; Hasan, Iftekhar; Mani, Sureshbabu; Ye, Pengfei
  2. Firm Entry and Macroeconomic Dynamics: A State-level Analysis By Gourio, Francois; Messer, Todd; Siemer, Michael
  3. Social capital and debt contracting: evidence from bank loans and public bonds By Hasan, Iftekhar; Hoi, Chun-Keung (Stan); Wu, Qiang; Zhang, Hao
  4. Physical and Human Capital over the Business Cycle By Accolley, Delali
  5. Information Communication Technologies and Firm Performance: Evidence for UK Firms By Timothy De Stefano; Richard Kneller; Jonathan Timmis
  6. Creative Destruction and Uncertainty By Sedlacek, Petr
  7. Why are Inventory-Sales Ratios at U.S. Auto Dealerships so High? By Dunn, Wendy E.; Vine, Daniel J.
  8. Communication in Vertical Markets: Experimental Evidence By Claudia Möllers; Hans-Theo Normann; Christopher M. Snyder
  9. Job Polarization, Job Tasks and the Role of Firms By Heyman, Fredrik
  10. Emission Leakage: Evidence from the US Multi-plant Firms By cui, jingbo; ji, yongjie
  11. Learning, Prices, and firm dynamics By Bastos,Paulo S. R.; Dias,Daniel; Timoshenko,Olga A.
  12. Competition and the welfare gains from transportation infrastructure: Evidence from the Golden Quadrilateral of India By Asturias, Jose; García-Santana, Manuel; Ramos Magdaleno, Roberto
  13. Techniques for Evaluating Staffing Needs and Incentives of Federal Civil Servants, Considering the Implementation of Program-Target Methods of Governance By Yuzhakov, Vladimir Nikolaevich; Dobrolyubova, Elena

  1. By: Francis, Bill; Hasan, Iftekhar; Mani, Sureshbabu; Ye, Pengfei
    Abstract: ​This study examines the performance impact of the relative quality of a CEO’s compensation peers (peers selected to determine a CEO’s overall compensation) and bonus peers (peers selected to determine a CEO’s relative-performance-based bonus). We use the fraction of peers with greater managerial ability scores (Demerjian, Lev, and McVay, 2012) than the reporting firm to measure this CEO’s relative peer quality (RPQ). We find that firms with higher RPQ tend to earn superior risk-adjusted stock returns and experience higher profitability growth compared with firms that have lower RPQ. These results cannot be fully explained by a CEO’s power, compensation level, intrinsic talent, nor by the board’s possible motivation to use peers to signal a firm’s prospect. Learning among peers and the increased incentive to work harder induced by the peer-based tournament, however, might contribute to RPQ’s positive performance effect. Preliminary evidence also shows that high RPQ is not associated with increased earnings management or increased risk-taking behaviors.
    Keywords: relative peer quality, firm performance, tournament, optimal contract
    JEL: G30
    Date: 2016–04–12
  2. By: Gourio, Francois; Messer, Todd; Siemer, Michael
    Abstract: Using an annual panel of US states over the period 1982-2014, we estimate the response of macroeconomic variables to a shock to the number of new firms (startups). We find that these shocks have significant effects that persist for many years on real GDP, productivity, and population. This result is consistent with simple models of firm dynamics where a “missing generation” of firms affects productivity persistently.
    Keywords: Productivity ; Business dynamics ; Employment ; Firm entry ; Missing generation ; New business formation
    JEL: E24 E32 L25 L26
    Date: 2016–02
  3. By: Hasan, Iftekhar; Hoi, Chun-Keung (Stan); Wu, Qiang; Zhang, Hao
    Abstract: We find that firms headquartered in U.S. counties with higher levels of social capital incur lower bank loan spreads. This finding is robust to using organ donation as an alternative social-capital measure and incremental to the effects of religiosity, corporate social responsibility, and tax avoidance. We identify the causal relation using companies with a social-capital-changing headquarter relocation. We also find that high-social-capital firms face loosened nonprice loan terms, incur lower at-issue bond spreads, and prefer bonds over loans. We conclude that debt holders perceive social capital as providing environmental pressure constraining opportunistic firm behaviors in debt contracting.
    Keywords: social capital, cooperative norm, moral hazard, cost of bank loans, public bonds
    JEL: G21 G32 Z13
    Date: 2015–11–20
  4. By: Accolley, Delali
    Abstract: The available disaggregated capital data are across industries. What one needs inter alia when calibrating multi-sector neoclassical growth models, are not industries’ capital endowments but the ones used in producing commodities, particularly consumption and investment goods. To fill this gap, following the existing literature on capital measurement and input-output analysis, we have sequentially produced these estimates for the US economy over the period 1998-2007. We have then used our estimates to calibrate and solve numerically a three-sector optimal growth model of physical and human capital accumulation. Using the right capital shares and stocks has improved the ability of the three-sector model to explain business cycle fluctuations.
    Keywords: Capital measurement, Macroeconomics, Business Cycles
    JEL: E01 E10 E32 E37
    Date: 2016–04–24
  5. By: Timothy De Stefano; Richard Kneller; Jonathan Timmis
    Abstract: A recent literature has begun to recognise that ICT is heterogeneous and the effects from improving communication are distinct from those that improve the storage and processing of information. In this paper we use the arrival of a new communication technology, ADSL broadband internet, to study the effects of communication ICT on firm performance. To do so free from endogeneity bias, we construct instruments using the infrastructure underlying broadband internet - the pre-existing telephone network. We show that, after placing various restrictions on the sample, instruments based on the timing of ADSL broadband enablement and the cable distance to the local telephone exchange satisfy the conditions for instrument relevancy and validity for some types of ICT. We find in turn, that communication-ICT causally affects firm size (captured by either sales or employment) but not productivity.
    Keywords: ICT, firms, instrumental variable JEL codes: D22, D24, O3
    Date: 2016–04
  6. By: Sedlacek, Petr
    Abstract: Recessions are times of high uncertainty. But does uncertainty cause downturns or vice versa? This paper argues that counter-cyclical fluctuations in uncertainty are, to a large extent, a natural result of creative destruction. I show analytically how aggregate growth and firm-level uncertainty are linked when firms gradually adopt a leading technology: expansions of the technological frontier widen the dispersion of firm-level productivity shocks, a benchmark measure of uncertainty. In a model of endogenous firm dynamics a technological expansion spurs a creative destruction process generating a temporary downturn and rendering uncertainty counter-cyclical. These predictions are confirmed in U.S. data showing that creative destruction accounts for 20 to 40 percent of overall variation in firm-level uncertainty.
    Keywords: Business Cycles; creative destruction; uncertainty
    JEL: D22 D80 E32
    Date: 2016–05
  7. By: Dunn, Wendy E.; Vine, Daniel J.
    Abstract: Motor vehicle dealerships in the United States tend to hold inventories equivalent to around 65 days’ worth of sales, a relatively high level that has been nearly unchanged for 50 years. Despite playing a prominent role in the volatility of U.S. business cycles, very little is known about why the auto industry targets inventory stocks at such a high level. We use a panel of inventory and sales data from 41 vehicle brands over 30 years and the solutions to two well-known inventory planning problems to show that vehicle inventories appear to be related to (1) the size of dealership franchise networks, which tend to be large; (2) product variety, which tends to be high; and (3) the volatility of new vehicle sales, which also tends to be high. We show that differences across brands in these variables explain a good bit of the cross-section dispersion in brand inventory-sales ratios. Offsetting changes in these factors over time also help explain why the industry’s overall inventory-sales ratio has been quite flat for many decades. More recently, the net increase observed in the inventory-sales ratio in the past couple of years is in contrast to fit of the model, which might suggest that some of that increase could reverse in the coming years.
    Keywords: Inventories ; Motor Vehicles
    JEL: E22 E32
    Date: 2016–05
  8. By: Claudia Möllers; Hans-Theo Normann; Christopher M. Snyder
    Abstract: When an upstream monopolist supplies several competing downstream firms, it may fail to monopolize the market because it is unable to commit not to behave opportunistically. We build on previous experimental studies of this well-known commitment problem by introducing communication. Allowing the upstream firm to chat privately with each downstream firm reduces total offered quantity from near the Cournot level (observed in the absence of communication) halfway toward the monopoly level. Allowing all three firms to chat together openly results in complete monopolization. Downstream firms obtain such a bargaining advantage from open communication that all of the gains from monopolizing the market accrue to them. A simple structural model of Nash bargaining fits the pattern of shifting surpluses well. We conclude with a discussion of the antitrust implications of open communication in vertical markets.
    JEL: C70 C90 K21 L42
    Date: 2016–05
  9. By: Heyman, Fredrik (Research Institute of Industrial Economics (IFN))
    Abstract: A large and growing empirical literature has presented evidence of job polarization, i.e. the simultaneous growth of high-wage jobs and low-wage jobs at the expense of middle-wage jobs. Thus far, the focus has been on employment in different occupations, without taking into account the role of firms in the labor demand process. The purpose of this paper is to bridge this knowledge gap by explicitly analyzing how firms influence the current process of job polarization. Using detailed Swedish matched employer-employee data for the 1997–2013 period, we present novel evidence on within-firm job polarization. Applying a decomposition framework, we also find that both within-firm and between-firm components are important for overall job polarization. We also show how the within-firm pattern is related to explanations for job polarization that have been proposed, i.e. the influence of routine-based technological change and the offshorability and automation of jobs. The results indicate that routineness of jobs seems to be the most important factor behind the observed pattern of within-firm job polarization.
    Keywords: Keywords: Job polarization; Job tasks; Routinization; Automation; Matched employer-employee data
    JEL: J24 J31 O33
    Date: 2016–05–16
  10. By: cui, jingbo; ji, yongjie
    Abstract: This paper seeks to examine the role of multi-plant’s network to determine their affiliated plants’ emissions in response to tightened environmental regulations. Polluting plants, which are located across the nation and are exposed to regional environmental pressures, form a network through their affiliated parent company. We investigate whether or not these multi-plant firms, to avoid local environmental compliance, shift pollution emissions from their affiliated plants in regulated counties to those in unregulated ones, thereby leading to emissions leakage. We compile a unique detailed plant-level dataset that pertains to the U.S. manufacturing industry over the period 1990-2008. Taking advantage of the spatial and temporal variations of designated nonattaintment status at county level, we seek to identify the effects of multi-plant firms’ network on annual changes in emissions of affiliated plants residing in regulated areas as compared with those in unregulated areas.
    Keywords: Environmental Economics and Policy,
    Date: 2016–05–25
  11. By: Bastos,Paulo S. R.; Dias,Daniel; Timoshenko,Olga A.
    Abstract: This paper documents new facts about the joint evolution of firm performance and prices in international markets and proposes a theory of firm dynamics emphasizing the interaction between learning about demand and quality choice to explain the observed patterns. Using data from the Portuguese manufacturing sector, the paper documents that: (1) within narrow product categories, firms with longer spells of activity in export destinations tend to ship larger quantities at similar prices, thus obtaining larger export revenue; (2) older exporters tend to import more expensive inputs; and (3) revenue growth within destinations (conditional on initial size) tends to decline with market experience. The authors develop a model of endogenous input and output quality choices in a learning environment that is able to quantitatively account for these patterns. Counterfactual simulations reveal that minimum quality standards on exports reduce welfare by lowering entry in export markets and reallocating resources from old and large toward young and small firms.
    Keywords: E-Business,Access to Markets,Economic Theory&Research,Airports and Air Services,Markets and Market Access
    Date: 2016–05–10
  12. By: Asturias, Jose; García-Santana, Manuel; Ramos Magdaleno, Roberto
    Abstract: A significant amount of resources is spent every year on the improvement of transportation infrastructure in developing countries. In this paper, we investigate the effects of one such large project, the Golden Quadrilateral in India, on the income and allocative efficiency of the economy. We do so using a quantitative model of internal trade with variable markups. We find real income gains of 2.71% in the aggregate and that allocative efficiency accounts for 8% of these gains. The importance of allocative efficiency varies greatly across states, and can account for up to 19% of the overall gains. Thus, allocative efficiency can play an important role in determining both the size and distribution of gains from new infrastructure.
    Date: 2016–05
  13. By: Yuzhakov, Vladimir Nikolaevich (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Dobrolyubova, Elena (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: The paper presents the method of estimating the staffing requirements of the federal bodies of executive authority in the framework of the implementation of program-targeted methods of governance and methods of performance evaluation of professional performance of federal civil servants, taking into account the implementation of program-target methods of management. These techniques are designed to meet the challenges identified in the analysis of the number of valuation practices and material incentives for civil servants, take into account the international experience of the implementation of strategic human resource management mechanisms, as well as the practices and requirements for the implementation of program-target methods of management in the Russian Federation.
    Keywords: civil servants, professional performance, program-target methods of governance
    Date: 2016–03–10

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