nep-bec New Economics Papers
on Business Economics
Issue of 2016‒09‒04
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Relational capital in lending relationships: Evidence from European family firms By Marco Cucculelli; Valentina Peruzzi; Alberto Zazzaro
  2. Busted! Now What? Effects of Cartel Enforcement on Firm Value and Corporate Policies By Dong, Ailin; Massa, Massimo; Zaldokas, Alminas
  3. Does Firm Heterogeneity Matter for Aggregate Dynamics? Evidence from the Allocation of Capital and Labor By Thomas Winberry; Pablo Ottonello
  4. Multinational Firms and International Business Cycle Transmission By Cravino, Javier; Levchenko, Andrei A.
  5. The Impact of Sin Culture: Evidence from Earning Management and Alcohol Consumption in China By Li, Zhe; Massa, Massimo; Xu, Niahang; Zhang, Hong
  6. Relative Performance of Liability Rules: Experimental Evidence By Vera Angelova; Giuseppe Attanasi; Yolande Hiriart
  7. The gradual evolution of buyer-seller networks and their role in aggregate fluctuations By Ryohei Hisano; Tsutomu Watanabe; Takayuki Mizuno; Takaaki Ohnishi; Didier Sornette
  8. Demand learning and firm dynamics:evidence from exporters By Vincent Vicard; Vincent Rebeyrol; Nicolas Berman
  9. Housing collateral and small firm activity in Europe By Ryan Niladri Banerjee; Kristian S Blickle
  10. Firm Entry and Exit and Aggregate Growth By Timothy Kehoe; Sewon Hur; Kim Ruhl; Jose Asturias
  11. Science and technology parks and firm growth By Arauzo Carod, Josep Maria; Segarra Blasco, Agustí, 1958-; Teruel, Mercedes
  12. The economic impacts of telecommunications networks and broadband internet: A survey By Bertschek, Irene; Briglauer, Wolfgang; Hüschelrath, Kai; Kauf, Benedikt; Niebel, Thomas
  13. The Role of Start-Ups in StructuralTransformation By Robert C. Dent; Fatih Karahan; Benjamin Pugsley; Aysegul Sahin

  1. By: Marco Cucculelli (Università Politecnica delle Marche); Valentina Peruzzi (Università Politecnica delle Marche); Alberto Zazzaro (Università di Napoli Federico II)
    Abstract: In this paper we empirically investigate the effects of active family involvement in the company’s management on bank-firm lending relationships and access to credit. Based on the trade-off between relational and management human capital, we explore whether the relational capital embodied in the family leadership of the company influences the lending relationships with the main bank in terms of information sensitivity and duration. Then, we test whether family firms with family CEOs are more likely to experience a credit restriction from banks than family firms appointing professional CEOs external to the family. Results indicate that family businesses appointing family managers are significantly more likely to maintain soft-information-based and longer-lasting lending relationships. However, having family executives does not have a negative impact on firm’s access to credit, while the creation of soft-information-based and long-lasting lending relationships significantly reduces the likelihood of experiencing credit restrictions. In view of these findings, family relational capital seems to have a univocal beneficial impact on bank-firm relationship in our sample.
    Keywords: Family firm, family CEO, soft-information, relational capital, relationship lending, credit rationing.
    JEL: D22 G21 G22
    Date: 2016–08
  2. By: Dong, Ailin; Massa, Massimo; Zaldokas, Alminas
    Abstract: In a cross-country study we look at the staggered passage of national leniency laws over 1990-2012. We show that these laws lead to more convictions of cartels, and generally increase the costs of collusion by reducing the average gross margins of the affected firms. We further examine how changing costs of collusion shape firm boundaries and show that firms reorganize their activities by engaging in more horizontal acquisitions, both in the roles as the acquirer and the target. These acquisitions tend to be associated with higher announcement returns. We find little evidence of the increase in strategic alliances or greenfield investments.
    Keywords: cartels; Collusion; firm boundaries; leniency laws; M&A
    JEL: D22 D43 G34 G38
    Date: 2016–08
  3. By: Thomas Winberry (University of Chicago); Pablo Ottonello (University of Michigan)
    Abstract: It is well-documented that there is tremendous heterogeneity in firms’ productivity, investment, and hiring, implying the allocation of resources is important in determining aggregate dynamics. In this project, we measure the dynamics of the allocation of capital and labor across firms and use this measurement to understand how heterogeneity matters for aggregate business cycles. We measure the allocation of resources using the distribution of marginal products across firms. Preliminary empirical results using Compustat data suggest that the dispersion of the marginal product of capital is strongly countercyclical, while the dispersion in the marginal product of labor is acyclical, implying that models with frictions to capital adjustment are most promising for explaining the data. To discriminate between particular models, we plan to quantitatively map their predictions for the distribution in terms of informative micro-level wedges, in the spirit of Hsieh and Klenow (2009).
    Date: 2016
  4. By: Cravino, Javier; Levchenko, Andrei A.
    Abstract: We investigate how multinational firms contribute to the transmission of shocks across countries using a large multi-country firm-level dataset that contains cross-border ownership information. We use these data to document two novel empirical patterns. First, foreign affiliate and headquarter sales exhibit strong positive comovement: a 10 % growth in the sales of the headquarter is associated with a 2 % growth in the sales of the affiliate. Second, shocks to the source country account for a significant fraction of the variation in sales growth at the source-destination level. We propose a parsimonious quantitative model to interpret these findings and to evaluate the role of multinational firms for international business cycle transmission. For the typical country, the impact of foreign shocks transmitted by all foreign multinationals combined is non-negligible, accounting for about 10 % of aggregate productivity shocks. On the other hand, since bilateral multinational production shares are small, interdependence between most individual country pairs is minimal. Our results do reveal substantial heterogeneity in the strength of this mechanism, with the most integrated countries significantly more affected by foreign shocks.
    Keywords: international business cycle comovement; multinational firms
    JEL: F23 F44
    Date: 2016–08
  5. By: Li, Zhe; Massa, Massimo; Xu, Niahang; Zhang, Hong
    Abstract: We study whether culture plays an important role in affecting firm incentives when formal institutions fall short. We link earnings management to alcohol-related sin culture in China, and we find that firms in regions in which alcohol plays a more prominent role show more earnings management. Tests using the regional gender ratio and snow/temperature as instruments suggest a causal interpretation. Moreover, a high level of alcohol consumption in CEOs' home region significantly enhances earnings management, suggesting that corporate leaders can transmit and propagate sin culture in society. We also find that firms more exposed to alcohol rely more on local business partners for their operations. Furthermore, culture can generate a negative externality by further reducing the likelihood of fraud detection; however, significant improvements in formal institutions (e.g., the 2012 anticorruption regulation) can suppress this impact. Our results shed new light on the impact of culture on the real economy.
    Keywords: Alcohol; Culture; Earnings management; Geographic shocks
    JEL: G30 M14 P48
    Date: 2016–08
  6. By: Vera Angelova; Giuseppe Attanasi; Yolande Hiriart
    Abstract: We compare the performance of liability rules for managing environmental disasters when third parties are harmed and cannot always be compensated. A firm can invest in safety to reduce the likelihood of accidents. The firm’s investment is unobservable to authorities. Externality and asymmetric information call for public intervention to define rules aimed at increasing prevention. We determine the investment in safety under No Liability, Strict Liability and Negligence, and compare it to the first best. Additionally, we investigate how the (dis)ability of the firm to fully cover potential damages affects the firm’s behavior. An experiment tests the theoretical predictions. In line with theory, Strict Liability and Negligence are equally effective; both perform better than No Liability; investment in safety is not sensitive to the ability of the firm to compensate potential victims. In contrast with theory, prevention rates absent liability are much higher and liability is much less effective than predicted.
    JEL: D82 K13 K32 Q58
    Date: 2016–08
  7. By: Ryohei Hisano (The University of Tokyo); Tsutomu Watanabe (The University of Tokyo); Takayuki Mizuno (National Institute of Informatics); Takaaki Ohnishi (The University of Tokyo); Didier Sornette (Swiss Federal Institute of Technology)
    Abstract: Buyer-seller relationships among firms can be regarded as a longi- tudinal network in which the connectivity pattern evolves as each firm receives productivity shocks. Based on a data set describing the evolu- tion of buyer-seller links among 55,608 firms over a decade and structural equation modeling, we find some evidence that interfirm networks evolve reflecting a firm's local decisions to mitigate adverse effects from neigh- bor firms through interfirm linkage, while enjoying positive effects from them. As a result, link renewal tends to have a positive impact on the growth rates of firms. We also investigate the role of networks in aggregate fluctuations.
    Date: 2016–08
  8. By: Vincent Vicard (Banque de France); Vincent Rebeyrol (Toulouse School of Economics); Nicolas Berman (Graduate Institute of International and)
    Abstract: This paper provides evidence that learning about demand is an important driver of firms’ dynamics. We present a model of Bayesian learning in which firms are uncertain about their idiosyncratic demand in each of the markets they serve, and update their beliefs as noisy information arrives. Firms are predicted to update more their beliefs the younger they are. Guided by the model, we use exporter-level data to identify separately the idiosyncratic demand shocks and the firms’ beliefs about future demand. The learning process appears stronger for younger firms and weaker in more uncertain environments. Further, accumulated knowledge decays during exit periods. The updating process generates a decline in growth rate with age conditional on size. Firm exit behavior is also consistent with the theory: the exit probability decreases with the firms’ beliefs and the demand shocks the firm faces, and demand shocks trigger more exit in younger cohorts.
    Date: 2016
  9. By: Ryan Niladri Banerjee; Kristian S Blickle
    Abstract: We investigate the importance of the housing-based collateral lending channel on firm borrowing, investment and employment. We focus on small firms in France, Italy, Spain and the United Kingdom. To identify a credit supply effect, as opposed to a home-equity driven demand effect, we compare activity in similar firms that differ by the degree of financial opacity, and therefore the degree of their reliance on collateral to overcome borrowing constraints. We find that changing house prices have a more pronounced effect on borrowing, investment and employment in financially more opaque firms. This relationship is particularly strong in southern Europe (Italy and Spain), where financial frictions are larger and the use of collateral more important.
    Keywords: firm financing, capital structure, housing collateral, employment
    Date: 2016–08
  10. By: Timothy Kehoe (University of Minnesota); Sewon Hur (University of Pittsburgh); Kim Ruhl (New York University Stern School of Busi); Jose Asturias (Georgetown University)
    Abstract: Using plant-level data from Chile and Korea, we find that, during episodes of rapid growth, most of the aggregate productivity growth is due to the entry and exit of firms while, during episodes of slower growth, it is mostly due to growth within and across existing firms. Studies for other countries suggest that this is an empirical regularity. We develop a dynamic general equilibrium model based on Hopenhayn (1992) which incorporates the theory of economic growth proposed by Parente and Prescott (1994) and Kehoe and Prescott (2002). In this model, new firms enter every period with productivities drawn from a distribution whose mean grows over time. After entering, a firm’s productivity grows, but not as rapidly as new firms’ productivity distribution. In a version of the model calibrated to U.S. plant-level data, we simulate two sets of reforms: a decrease in new firms’ costs of entry and a reduction in the barriers to technology adoption for new firms. The model reproduces the regularity that we observe in the data, and confirm that entry and exit of firms is crucial for reforms to generate rapid growth.
    Date: 2016
  11. By: Arauzo Carod, Josep Maria; Segarra Blasco, Agustí, 1958-; Teruel, Mercedes
    Abstract: This paper aims to contribute to understanding the role played by Science and Technology Parks in fostering firm growth. Public policies have given such parks a central role but empirical research has not come to a consensus on whether there is a link between in†park location and firm growth. Applying a matching procedure to our mercantile register data we obtain a database of 286 in†park firms, together with 268 out†park firms. Our results show that in†park firms show greater growth rates and volatility than their counterparts, but we do not find evidence of their capacity to obtain larger long†term debts. Keywords: science and technology parks, firm location, firm growth. JEL codes: L25, O30, R11, R58
    Keywords: Parcs tecnològics, Localització industrial, Economia regional, Empreses -- Creixement, Innovacions tecnològiques -- Aspectes econòmics, 332 - Economia regional i territorial. Economia del sòl i de la vivenda,
    Date: 2016
  12. By: Bertschek, Irene; Briglauer, Wolfgang; Hüschelrath, Kai; Kauf, Benedikt; Niebel, Thomas
    Abstract: We provide a structured overview of the quantitative literature on the economic impacts of telecommunications networks and broadband internet. Differentiating between wireline and wireless technologies as well as broadband availability and broadband adoption, respectively, we review studies investigating the impacts on economic growth, employment and regional development as well as productivity and firm performance. Eventually, the survey does not only allow the identification of main research gaps but also provides useful information for policy makers on the significance and importance of communication networks for social welfare.
    Keywords: Telecommunications,Broadband,Economic Growth,Employment,Regional Development,Productivity
    JEL: D24 J23 J24 L96 O33 O47
    Date: 2016
  13. By: Robert C. Dent; Fatih Karahan; Benjamin Pugsley; Aysegul Sahin
    Abstract: The U.S. economy has been going through a striking structural transformation—the secular reallocation of employment across sectors—over the past several decades. We propose a decomposition framework to assess the contributions of various margins of firm dynamics to this shift. Using firm-level data, we find that at least 50 percent of the adjustment has been taking place along the entry margin, owing to sectors receiving shares of start-up employment that differ from their overall employment shares. The rest is mostly the result of life cycle differences across sectors. Declining overall entry has a small but growing effect of dampening structural transformation.
    Keywords: structural transformation, employment dynamics, sectoral reallocation
    Date: 2016–01

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