nep-bec New Economics Papers
on Business Economics
Issue of 2016‒07‒09
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Growing by learning: firm-level evidence on the size-productivity nexus By Enrique Moral-Benito
  2. Training, quality of management and firm level bargaining By Damiani, Mirella; Ricci, Andrea
  3. Firm-level Total Factor Productivity Growth: Canadian Freight Railways, 1986 to 2009 By James Uguccioni
  4. Post-reorganization survival: a semi-parametric and non-parametric analysis of firm characteristics By Lara Abdel Fattah; Sylvain Barthélémy; Nadine Levratto; Benjamin Trempont
  5. Honor and stigma in mechanisms for environmental protection By Prasenjit Banerjee; Rupayan Pal; Jason F. Shogren
  6. Measuring Agency Costs and the Value of Investment Opportunities of U.S. Bank Holding Companies with Stochastic Frontier Estimation By Joseph P. Hughes; Loretta J. Mester; Choon-Geol Moon
  7. Search and matching frictions and business cycle fluctuations in Bulgaria By Vasilev, Aleksandar
  8. Agglomeration and Technological Spillovers: Firm-Level Evidence from China's Electric Apparatus Industry By He, Ming; Chen, Yang; Schramm, Ronald M.
  9. Working Paper 06-16 - Young Firms and Industry Dynamics in Belgium By Michel Dumont; Chantal Kegels
  10. Dynamic Corporate Risk Management: Motivations and Real Implications By Dionne, Georges; Gueyie, Jean-Pierre; Mnasri, Mohamed
  11. Employment and hours over the business cycle in a model with search frictions By Noritaka Kudoh; Hiroaki Miyamoto; Masaru Sasaki

  1. By: Enrique Moral-Benito (Banco de España)
    Abstract: It is a well-known empirical regularity that small firms are less productive than large firms. However, does size cause productivity or vice versa? Using matching methods, I find that productivity shocks are followed by significant increases in size defined by employment. In contrast, size shocks are not followed by productivity gains at the firm level. This finding casts doubt on the conventional wisdom that aggregate productivity in Spain is driven by a firm size distribution biased towards small firms in comparison with other developed countries. According to my findings, low firm-level productivity might play a crucial role in shaping the Spanish firm size distribution.
    Keywords: firm-level data, productivity, size distribution
    JEL: L11 L25 D24
    Date: 2016–07
  2. By: Damiani, Mirella; Ricci, Andrea
    Abstract: Abstract The double aim of this paper is to investigate the link between firm training behaviour and the adoption of performance-related pay (PRP) and to verify how the quality of management contributes to explaining the strength of this link. Using Ordinary Least Squares Estimates and Fixed Effect Estimates for a sample of Italian firms, we find that training is a significant determinant of firm level bargaining on PRP. Furthermore, we find that managerial quality plays a significant positive role and suggest that this is because managerial quality favours the evolution of social norms based on wage bonuses that enhance trust, sustain collaborative relationships and motivate co-workers to train each other. Jel Classifications: M53; M52; J50; I20
    Keywords: Keywords: Training; Compensation; Management; Education
    JEL: J3 J33 M52 M53
    Date: 2016–06–21
  3. By: James Uguccioni
    Abstract: Canadian railways are a vital part of the country’s transportation sector, moving goods and people across the country. We perform firm-level productivity analysis of Canadian freight railways for 1986 to 2009, focusing on the two railways which dominate the market: Canadian National (CN) and Canadian Pacific (CP). We obtain total factor productivity (TFP) estimates both by constructing productivity indices and by econometrically estimating cost functions. Driven in part by operational improvements, the strong TFP growth at both firms considerably outpaced aggregate TFP growth in Canada over the period of interest. This robust TFP growth, together with significant capital deepening, led to impressive labour productivity gains. We pay special attention to the productivity effects of the 1995 privatization of CN. While CN enjoyed much stronger productivity growth over the 1986-2009 period than CP, its performance was equally superior before and after the 1995 privatization.
    Keywords: Rail, Transport, Productivity, Transportation, Canada, Total Factor Productivity, Multifactor Productivity
    JEL: D22 D24 H32 J24 L92
    Date: 2016–06
  4. By: Lara Abdel Fattah; Sylvain Barthélémy; Nadine Levratto; Benjamin Trempont
    Abstract: This paper aims at bringing evidence on firm survival after bankruptcy. Instead of considering survival as a binary variable we take into account the duration of the reorganization procedure. We follow a sample of French firms throughout their restructuring process and document factors influencing the reorganization outcome. Based on the existing theoretical and empirical literature on the link between firm ownership structure and performance, we particularly focus on the influence of firm affiliation to a business group and business groups’ characteristics. Using a Cox proportional hazards model and a Random Forests model, we find that firm structural and financial characteristics have a strong power to explain survival at different time horizons, however, very few of firm financial characteristics used previously for bankruptcy prediction are useful for predicting the final outcome of reorganization once a reorganization plan is voted. In addition, we show that firm ownership structure proxied by firm affiliation to a business group and business group characteristics has no significant influence on the outcome and duration of reorganization.
    Keywords: reorganization, bankruptcy, survival, business groups, Cox model, Random Forests.
    JEL: G33 K20 C14
    Date: 2016
  5. By: Prasenjit Banerjee (University of Manchester); Rupayan Pal (Indira Gandhi Institute of Development Research); Jason F. Shogren (University of Wyoming)
    Abstract: Honor and stigma play a role in environmental protection. Environmental honors are bestowed on people and firms who go out of their way to do right by the environment. Similarly, environmental stigma is put on people or firms who are publicly taken to task for their poor environmental record. We design a voluntary incentive mechanism by incorporating honor and stigma to induce heterogeneous firms to protect the environment at less cost. We encounter a motivational costs incurred by the green firm-it loses its leadership rents. Our result suggests (i) an additional social reward is needed for a green firm; and (ii) the brown firm may sacrifice information rent.
    Keywords: Mechanism, reputation, environmental risk, honor, stigma, social norm
    JEL: D03 Q52 Q58
    Date: 2016–05
  6. By: Joseph P. Hughes (Rutgers University); Loretta J. Mester (Federal Reserve Bank of Cleveland); Choon-Geol Moon (Hanyang University)
    Abstract: By eliminating the influence of statistical noise, stochastic frontier techniques permit the estimation of the best-practice value of a firm’s investment opportunities and the magnitude of a firm’s systematic failure to achieve its best-practice market value – a gauge of the magnitude of agency costs. These frontiers are estimated from the performance of all firms in the industry and, thus, capture best-practice performance that is, unlike Tobin’s q ratio, independent of the managerial decisions of any particular firm. Using the frontier measure of performance applied to 2007 data on top-tier, publicly traded U. S. bank holding companies, we obtain evidence on market discipline: we find that higher managerial ownership at most banks tends to align the interests of insiders with those of outside owners and to be associated with improved financial performance; at most banks, higher blockholder ownership is associated with improved financial performance obtained from blockholders’ monitoring; and, at most banks, higher product-market concentration is associated with poorer financial performance and the so-called managerial quiet life. Using the frontier measure of investment opportunities, we find evidence that banks with relatively higher-valued investment opportunities achieve less of their potential market value, while banks with lower-valued opportunities achieve more of their potential value. In spite of their lower-valued opportunities, these banks, on average, achieve the same Tobin’s q ratio and, thus, appear better able to exploit their less valuable investment opportunities. Our results suggest that higher-valued opportunities may reduce managers’ performance pressure and provide a stronger incentive to consume agency goods.
    Keywords: banking, efficiency, ownership structure, competition
    JEL: C58 G21 G28
    Date: 2016–06–24
  7. By: Vasilev, Aleksandar
    Abstract: In this paper we investigate the quantitative importance of search and matching fric- tions in Bulgarian labor markets. This is done by augmenting an otherwise standard real business cycle model a la Long and Plosser (1983) with both a two-sided costly search and fiscal policy. This introduces a strong propagation mechanism that allows the model to capture the business cycles in Bulgaria better than earlier models. The model performs well vis-a-vis data, especially along the labor market dimension, and in addition dominates the market-clearing labor market framework featured in the stan- dard RBC model, e.g Vasilev (2009), as well as the indivisible labor extension used in Hansen (1985).
    Keywords: general equilibrium,unemployment and wages,business cycles,fiscal policy
    JEL: D51 E24 E32 J40
    Date: 2016
  8. By: He, Ming (Division of Economics, Xi'an Jiaotong-Liverpool University); Chen, Yang (Division of Economics, Xi'an Jiaotong-Liverpool University); Schramm, Ronald M. (Division of Economics, Xi'an Jiaotong-Liverpool University)
    Abstract: We use a spatial autoregressive model to study the determinants of firm-level productivity growth using longitudinal data on China's electric apparatus industry over the period of 1999-2007. Factors considered include technological spillover, R&D and export behavior, agglomeration economies, and public expenditure. We propose modifications to Kelejian and Prucha's (1998) FE-2SLS procedure and Mutl and Pfaffermayr's (2011) RE-FG2SLS procedure to cope with the technical difficulties with our unbalanced panel. Statistical evidence strongly favors the fixed effects model over the random effects model. According to our estimates, there are large and signiffcant technological spillovers among firms. Individually, firms benefit from their own R&D and export activities. Market competition and public expenditure in the local and neighboring jurisdictions are found to be important determinants to productivity. Our model also provides direct evidence that the technological spillover effects attenuate rapidly in spatial distance. Finally, the inter-regional spillover effects are found to be more pronounced and more significant on urban districts or jurisdictions with smaller geographical areas. Geographic proximity to neighbors and special administrative role jointly contribute to this observation.
    Date: 2016–03–03
  9. By: Michel Dumont; Chantal Kegels
    Abstract: Recent studies reveal the importance of entrants and young firms for job creation, productivity and economic growth. Some scholars argue that the falling rate at which new firms are established, can explain, to a certain extent, the productivity slowdown witnessed in most OECD countries. Belgium appears to stand out unfavourably from other countries in its very low start-up rate. This paper reviews the empirical cross-country evidence, provides some additional analysis of the role of young firms in industry-level employment and productivity dynamics in Belgium and concludes with a discussion of the implications for economic policy.
    JEL: D22 D24 E23 E24 H32 L25 L26 L53
    Date: 2016–06–24
  10. By: Dionne, Georges (HEC Montreal, Canada Research Chair in Risk Management); Gueyie, Jean-Pierre (HEC Montreal, Canada Research Chair in Risk Management); Mnasri, Mohamed (HEC Montreal, Canada Research Chair in Risk Management)
    Abstract: We investigate the dynamics of corporate hedging programs by US oil producers and examine the effects of hedging maturity choice on firm value. We find evidence of a concave relation between hedging maturity and the likelihood of financial distress and oil spot prices. We further investigate the motivations of the early termination of outstanding hedging contracts. We evaluate the causal effects of hedging and show that hedging maturity increases firm value. Using the essential heterogeneity approach, we find that firms value is more strongly related to short-term hedging maturities. This is the first time this approach is applied in corporate finance.
    Keywords: Hedging maturity; early termination of contracts; firm value; heterogeneous treatment effects; essential heterogeneity models; oil industry
    JEL: D80 G32
    Date: 2016–07–06
  11. By: Noritaka Kudoh (Nagoya University); Hiroaki Miyamoto (University of Tokyo); Masaru Sasaki (Osaka University)
    Abstract: This paper studies a labor market search-matching model with multi-worker firms to investigate how firms utilize employment and hours of work over the business cycle. The earnings function derived from intra-firm bargaining determines the costs of utilizing the two margins of labor adjustment. We calibrate the model for the Japanese labor market, in which fluctuations in hours of work account for 79 percent of the variations in total labor input. The model replicates much of the fluctuations in total labor input, employment, and hours per employee without wage rigidity even though the source of fluctuations is total factor productivity (TFP) alone. If hours of work are determined by bargaining, then the intensive margin makes the unemployment volatility puzzle much harder to resolve.
    Keywords: search, hours of work, employment, business cycles, multi-worker firms
    JEL: E32 J20 J64
    Date: 2016–06

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