nep-bec New Economics Papers
on Business Economics
Issue of 2016‒06‒14
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Enterprise Risk Management Measurement Method By Juthamon Sithipolvanichgul
  2. Entry Games and Free Entry Equilibria By Michele Polo
  3. When arm’s length is too far. Relationship banking over the business cycle By Beck, Thorsten; Degryse, Hans; De Haas, Ralph; van Horen, Neeltje
  4. Regional importance of Mittelstand firms and innovation performance By Berlemann, Michael; Jahn, Vera
  5. Corporate social responsibility and firm financial performance: the mediating role of productivity By Hasan, Iftekhar; Kobeissi, Nada; Liu, Liuling; Wang, Haizhi
  6. For God's sake. The impact of religious proximity on firms' exports By Alessia Lo Turco; Daniela MAGGIONI
  7. Tacit collusion and market concentration under network effects By Rupayan Pal; Marcella Scrimitore
  8. The Economic Impact of EU Guarantees on Credit to SMEs Evidence from CESEE Countries By Pierfederico Asdrubali; Simone Signore
  9. Regulatory Holidays and Optimal Network Expansion By Willems, Bert; Zwart, Gijsbert
  10. A Unifying Framework for Farrell Efficiency Measurement Coherent with Profit-maximizing Principle By Rolf Färe; Xinju He; Sungko Li; Valentin Zelenyuk
  11. Food Price, Firm Productivity and Market Structure in Indonesian Food and Beverages Industry By He, Xi
  12. Vertical Integration and Downstream Collusion By Sara Biancini; David Ettinger

  1. By: Juthamon Sithipolvanichgul (University of Ediburgh)
    Abstract: Enterprise Risk Management (ERM) is seen as an holistic approach to ensure a good risk management strategy for companies to help minimise potential pitfalls and improve long term business sustainability. However questions still arise whether ERM implementation impacts on a firm's performance. Past studies have shown no consensus that ERM does increase firm performance as advocated by regulators and business advisors. So the issue exists as to whether ERM implementation has been adequately assessed. An alternative measurement of ERM implementation is proposed. The measurement is based on standardised integrative scoring. The relationship between the proposed measurement and firm performance is then considered taking account of appropriate control variables. Using data from the Thailand Stock Exchange it was found implementing ERM can improve firm performance in term of Tobin's Q, ROE and ROA.
    Keywords: Enterprise Risk Management, Risk Management, Risk Organisation, Holistic Strategic, Firm Performance
  2. By: Michele Polo
    Abstract: This Chapter reviews the theoretical liteature on entry games and free entry equilibria. We show that a wide range of symmetric oligopoly models share common comparative statics properties. Individual profits and quantities decrease in the number of firms, and tend to competitive or monopolistic competitive equilibria when the number of firms increases indefinitely. The maximum number of firms sustainable in a symmetric long run equilibrium depends on technology (economies of scale), preferences (market size) and strategies (toughness of price competition). On the normative side, in homogeneous product markets the business stealing effect drives the result of excessive entry, whereas adding product differentiation and the utillity from variety may revert the result. We then consider asymmetric free entry equilibria that exploit the aggregative nature of many oligopoly models. Finally, we discuss endogenous sunk costs and persistent concentration and frictionless entry and contestable markets.
    Keywords: Entry, Free entry equilibria, endogenous and exogsnous sunk costs, contestable markets
    JEL: L1 L13 D43
    Date: 2015
  3. By: Beck, Thorsten; Degryse, Hans; De Haas, Ralph; van Horen, Neeltje
    Abstract: Using a novel way to identify relationship and transaction banks, we study how banks’ lending techniques affect funding to SMEs over the business cycle. For 21 countries we link the lending techniques that banks use in the direct vicinity of firms to these firms’ credit constraints at two contrasting points of the business cycle. We show that relationship lending alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe.
    JEL: F36 G21 L26 O12 O16
    Date: 2014–07–07
  4. By: Berlemann, Michael; Jahn, Vera
    Abstract: Despite of the deeply rooted belief of politicians from all over the world in the important role of Mittelstand firms, there has been surprisingly little empirical research on this issue, yet. This article contributes to the literature by studying whether the relative regional importance of Mittelstand firms has an effect on regional innovation performance. Using a cross section of German NUTS-3-regions, a significantly positive relation between the relative importance of owner-managed SMEs and patent applications is identified. This finding is highly robust when controlling for spatial correlations as they often occur in highly disaggregated regional analyses.
    Keywords: Innovation,Mittelstand firms,Owner-management,SMEs,Germany
    JEL: O31 C21 D23
    Date: 2015
  5. By: Hasan, Iftekhar; Kobeissi, Nada; Liu, Liuling; Wang, Haizhi
    Abstract: This study treats firm productivity as an accumulation of productive intangibles and posits that stakeholder engagement associated with better corporate social performance helps develop such intangibles. We hypothesize that because shareholders factor improved productive efficiency into stock price, productivity mediates the relationship between corporate social and financial performance. Furthermore, we argue that key stakeholders’ social considerations are more valuable for firms with higher levels of discretionary cash and income stream uncertainty. Therefore, we hypothesize that those two contingencies moderate the mediated process of corporate social performance with financial performance. Our analysis, based on a comprehensive longitudinal dataset of U.S. manufacturing firms from 1992 to 2009, lends strong support for these hypotheses. In short, this paper uncovers a productivity-based, context-dependent mechanism underlying the relationship between corporate social performance and financial performance.
    Keywords: corporate social responsibility, corporate financial performance, total factor productivity, stakeholder management, discretionary cash, organizational risk
    Date: 2016–04–20
  6. By: Alessia Lo Turco (Università Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Daniela MAGGIONI (Università di Catania, Department of Political Sciences)
    Abstract: Using a rich firm level data set for Turkish manufacturing, we test whether the sharing of similar religious beliefs with potential contracting parties drives a firm.s first time entry in export markets. We exploit variation in the practice of Islam across Turkish provinces andwe find that firms located in provinces characterised by stronger religiousness are more likely to enter export destinations with a higher share ofMuslims among their population. This result is robust to the control for trade, cultural and migration ties, reverse causality and to several further sensitivity checks. Religious proximity, in particular, eases export entry for producers of "trust intensive" goods and mitigates the role of export experience in subsequent foreign market entries. All in all, our evidence hints at the important role of religious proximity in reducing export entry sunk costs by fostering higher trust among contracting parties.
    Keywords: Islam, export entry, uncertainty, cultural distance
    JEL: F14 F11 D22 D80 N30
    Date: 2016–05
  7. By: Rupayan Pal (Indira Gandhi Institute of Development Research); Marcella Scrimitore (University of Salenta)
    Abstract: In an infnitely repeated Cournot game with trigger strategy punishment, we demonstrate that the relationship between market concentration and collusion sustainability depends on the strength of network externalities. The latter is shown to interact with the number of firms and to affect the profitability of cooperation vs. competition, which delivers the result, challenging conventional wisdom, that lower market concentration can make collusion more stable.
    Keywords: Collusion, market concentration, network ekects
    JEL: L13 L14 L41
    Date: 2016–04
  8. By: Pierfederico Asdrubali; Simone Signore
    Abstract: This paper estimates the economic impact at final beneficiary level of the Multi-Annual Programme for enterprises and entrepreneurship EU SME Guarantee Facility in Central, Eastern and South-Eastern European (CESEE) Countries in the period 2005-2012. Data on SME beneficiaries has been collected from administrative records and enriched with information on firms’ financial accounts taken from the Orbis database. The paper combines propensity scores and difference-in-differences estimation in order to evaluate the effect of having received a MAP-guaranteed SME loan on firm performance (employment, production, profitability and factor productivity) against a control group of comparable firms. Our results offer several insights. We find that the EU SME Guarantee Facility in the CESEE region had, on average, a significant positive effect on firms’ employment: beneficiary firms were able to increase their workforce by 17.3%, compared to the control groups, within the first 5 years following the issuance of the guaranteed loan. Moreover, by the fifth year after the signature date, the turnover of MAP beneficiaries had increased by 19.6%, compared to non-beneficiary companies. However, MAP beneficiaries faced a temporary setback in productivity, with respect to their peers, an effect that could be due to allocative inefficiencies following the MAP-induced increase in their production factors. Such gap was, however, partially absorbed over the medium run. By breaking down our sample by country, signature year, size and age classes, we observe that micro and young SMEs have benefited the most from MAP-guaranteed loans in terms of economic additionality. Overall, our findings suggest that the EU SME Guarantee Facility has been successful in bringing significant positive effects on beneficiary firms in CESEE Countries.
    JEL: O52 F33 E50 E63
    Date: 2015–07
  9. By: Willems, Bert (Tilburg University, Center For Economic Research); Zwart, Gijsbert (Tilburg University, Center For Economic Research)
    Abstract: We model the optimal regulation of continuous, irreversible, capacity expansion, in a model in which the regulated network firm has private information about its capacity costs, investments need to be financed out of the firm’s cash flows from selling network access and demand is stochastic. If asymmetric information is large, the optimal mechanism consists of a regulatory holiday for low-cost firms, and a mark-up regime for higher-cost rms. With the regulatory holiday, a firm receives the full revenue of capacity sales, and expands capacity as if it were an unregulated monopolist. Under the mark-up regime, a firm receives only a fraction of the capacity revenues, and is obliged to expand capacity whenever the price for capacity reaches a threshold. The regulatory holiday is necessary to fund information rents to the most efficient firms, which invest relatively early, as direct investment subsidies are not feasible.
    Keywords: regulatory holiday; real option value; asymmetric information; optimal contracts
    JEL: D81 D82 L52
    Date: 2016
  10. By: Rolf Färe (Oregon State University); Xinju He (Hong Kong Baptist University); Sungko Li (Hong Kong Baptist University); Valentin Zelenyuk (School of Economics, The University of Queensland)
    Abstract: Measuring profit efficiency is a challenging task. This paper synthesizes existing approaches to form a general Farrell-type model of profit efficiency. Our derivations help us unveil new and interesting relationship between existing profit efficiency measures and the Farrell-type profit efficiency measures. In turn, this helps us establishing a complete framework of studying efficiency behavior of firms, where the profit efficiency measure satisfies some desirable properties and contains Farrell output-oriented or input-oriented measures of technical efficiency and allocative efficiency as multiplicative elements. The new component, revenue efficient allocative efficiency, introduced in this paper can help firms to make decision and has not been studied in the literature before.
    JEL: C44 D24
    Date: 2016–05
  11. By: He, Xi
    Keywords: Food Security and Poverty, Industrial Organization,
    Date: 2016–05–25
  12. By: Sara Biancini (Normandie Université, UNICAEN, CREM CNRS, France); David Ettinger (Paris Dauphine, PSL, LEDa and CEREMADE, France)
    Abstract: We investigate the effect of a vertical merger on downstream firms' ability to collude in a repeated game framework. We show that a vertical merger has two main effects. On the one hand, it increases the total collusive profits, increasing the stakes of collusion. On the other hand, it creates an asymmetry between the integrated firm and the unintegrated competitors. The integrated firm, accessing the input at marginal cost, faces higher profits in the deviation phase and in the non cooperative equilibrium, which potentially harms collusion. As we show, the optimal collusive profit-sharing agreement takes care of the increased incentive to deviate of the integrated firm, while optimal punishment erases the difficulty related to the asymmetries in the non cooperative state. As a result, vertical integration generally favors collusion.
    Keywords: Vertical Integration, Tacit Collusion
    JEL: D43 L13 L40 L42
    Date: 2016–05

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