nep-bec New Economics Papers
on Business Economics
Issue of 2017‒07‒09
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Offshore Production and Business Cycle Dynamics with Heterogeneous Firms By Zlate, Andrei
  2. Board Quotas and Director-Firm Matching By Ferreira, Daniel; Ginglinger, Edith; Laguna, Marie-Aude; Skalli, Yasmine
  3. Business Cycle Dating after the Great Moderation: A Consistent Two – Stage Maximum Likelihood Method By Gilbert Mbara
  4. The government as a large shareholder: impact on corporate governance By Fernandes, Marcelo; Novaes, Walter
  5. Microeconomic mechanisms behind export spillovers from FDI: Evidence from Bulgaria By Ciani, Andrea; Imbruno, Michele
  6. Active labour market policies and short-time work arrangements: evidence from a survey of Luxembourg firms By Efstathiou, Konstantinos; Mathä, Thomas Y.; Veiga, Cindy; Wintr, Ladislav
  7. Pre- and post-award outsourcing: Temporary partnership versus subcontracting in public procurement By Laura Rondi; Paola Valbonesi
  8. CDS and credit: Testing the small bang theory of the financial universe with micro data By Gündüz, Yalin; Ongena, Steven; Tümer-Alkan, Günseli; Yu, Yuejuan
  9. To bribe or not to bribe? Corruption uncertainty and corporate practices By Hanousek, Jan; Shamshur, Anastasiya; Tresl, Jiri
  10. All on board? New evidence on board gender diversity from a large panel of firms By Joanna Tyrowicz; Jakub Mazurek
  11. Occupational Licensing Reduces Racial and Gender Wage Gaps: Evidence from the Survey of Income and Program Participation By Peter Blair; Bobby Chung
  12. The Effects of a Day Off from Retail Price Competition: Evidence on Consumer Behavior and Firm Performance in Gasoline Retailing By Foros, Øystein; Nguyen, Mai Thi; Steen, Frode
  13. New firms’ bankruptcy: does local banking market matter? By Giuseppe Arcuri; Maurizio La Rocca; Nadine Levratto

  1. By: Zlate, Andrei (Federal Reserve Bank of Boston)
    Abstract: To examine the effect of offshoring through vertical FDI on the international transmission of business cycles, I propose a two-country model in which firms endogenously choose the location of their production plants over the business cycle. Firms face a sunk cost to enter the domestic market and an additional fixed cost to produce offshore. As such, the offshoring decision depends on the firm-specific productivity and on fluctuations in the relative cost of effective labor. The model generates a procyclical pattern of offshoring and dynamics along its extensive margin that are consistent with data from Mexico's maquiladora sector. The extensive margin enhances the procyclical response of the value added offshore to expansions in the home economy, as the number of offshoring firms mirrors the dynamics of firm entry at home. As a result, offshoring increases the comovement of output across economies, in line with the empirical evidence.
    Keywords: Offshore production; extensive margin; heterogeneous firms; firm entry; business cycle dynamics; terms of labor.
    JEL: F23 F41
    Date: 2016–02–17
  2. By: Ferreira, Daniel; Ginglinger, Edith; Laguna, Marie-Aude; Skalli, Yasmine
    Abstract: We study the impact of board gender quotas on the labor market for corporate directors. We find that the annual rate of turnover of female directors falls by about a third following the introduction of a quota in France in 2011. This decline in turnover is more pronounced for new appointments induced by the quota, and for appointments made by firms that regularly hire directors who are members of the French business elite. By contrast, the quota has no effect on male director turnover. The evidence suggests that, by changing the director search technology used by firms, the French quota has improved the stability of director-firm matches.
    Keywords: Corporate Boards; corporate governance; Gender Quotas; labor markets; Matching; Turnover
    JEL: G34 G38 J63 J70
    Date: 2017–06
  3. By: Gilbert Mbara (University of Warsaw)
    Abstract: The two-state Markov switching model of dating recessions breaks down when confronted with the low volatility macroeconomic time series of the post 1984 Great Moderation era. In this paper, I present a new model specification and a two--stage maximum likelihood estimation procedure that can account for the lower volatility and persistence of macroeconomic times series after 1984, while preserving the economically interpretable two--state boom--bust business cycle switching. I first demonstrate the poor finite sample properties (bias and inconsistency) of standard models then suggest a new specification and estimation procedure that resolves these issues. The suggested likelihood profiling method achieves consistent estimation of unconditional variances across volatility regimes while resolving the poor performance of models with multiple lag structures in dating business cycle turning points. Based on this novel model specification and estimation, I find that the nature of US business cycles has changed: economic growth has permanently become lower while booms last longer than before. The length and size of recessions however remain unchanged.
    Keywords: Regime Switching, Hidden Markov Models, Great Moderation, Maximum Likelihood Estimation
    JEL: C5 C51 C58 C32 E32
    Date: 2017
  4. By: Fernandes, Marcelo; Novaes, Walter
    Abstract: What is the role that governments play as large shareholders of mixed-owned firms? By solving a bargaining model over investment decisions, we unveil two corporate governance effects of the government's activism as a large shareholder: a voting effect that always lowers the value of minority votes and an interventionism effect that, depending on the government's political interests, either raises or lowers diversion of firm value by controlling shareholders. We apply our model to Brazilian data on voting premia and find that the activism of the Brazilian government from 2008 to 2012 harmed minority shareholders by making their votes less important for business decisions.
    Date: 2017–06–28
  5. By: Ciani, Andrea; Imbruno, Michele
    Abstract: This paper studies how the presence of multinational enterprises affects the export performance of Bulgarian manufacturing firms - Export spillovers from FDI. Using export data at the firm/product/destination level for the period 2004-2006, we find positive forward spillover on export value and quantity, related to quality upgrading. Conversely, we find negative (or insignificant) backward and horizontal spillover on export flows, related to quality downgrading. When aggregating data at the firm level and considering that a firm can operate in several sectors, we show that the presence of foreign input suppliers allows domestic firms to export additional varieties of lower quality and upgrade the average quality of existing varieties, whereas the presence of foreign customers generates the opposite effect.
    Keywords: Export spillover,FDI,Multi-product firms,Unit value,Quality
    JEL: F14 F23 F61
    Date: 2017
  6. By: Efstathiou, Konstantinos; Mathä, Thomas Y.; Veiga, Cindy; Wintr, Ladislav
    Abstract: We analyse the use of active labour market policy (ALMP) measures and short-time work arrangements (STWAs) by Luxembourg firms during the years of economic and financial crisis (2008-09) and the subsequent European sovereign debt crisis (2010-13). About 34% of Luxembourg firms used ALMPs between 2008 and 2013. Economy-wide, use of ALMPs increased along both the extensive margin (more firms) and the intensive margin (more measures per firm). The likelihood that a firm hired with recourse to ALMPs is greater for large, domestically oriented, multiple establishment firms, firms facing strong demand, with concerns about labour cost pressures and unavailability of skilled labour. The crisis saw a surge in firms using STWAs. The likelihood of applying for STWAs increases with demand volatility, the share of workers with permanent contracts, export orientation and the inability to shift workers between establishments. Firms reported that 20-25% of jobs in STWAs were saved by this measure. JEL Classification: C25, J63, J68
    Keywords: active labour market policy, crisis, firms, short-time work arrangements, survey
    Date: 2017–06
  7. By: Laura Rondi (Politecnico di Torino); Paola Valbonesi (University of Padova)
    Abstract: This paper studies the impact of qualification rules for entry into public procurement auctions on firm bids and contract execution, contributing to the debate about which regulations foster the efficient participation of small and medium enterprises (SMEs). Using rich and detailed microdata on all public work contracts awarded by the regional government of Valle d’Aosta from 2000 to 2008, we investigate the differences between pre-award outsourcing by temporary partnerships (TPs) and post-award outsourcing by firms in optional or mandatory subcontracting. We find that both outsourcing status and firm size affect bids and the probability of time and cost overruns. TPs bid lower prices than mandatory and large optional firms and perform well in contract execution, similar to small optional firms. Mandatory firms are more likely to exceed expected cost and are no better in timely delivery. The evidence holds when we disentangle horizontal and vertical subcontracting. Our results highlight the TPs’ advantage of freedom in choosing economic size and technical boundaries before entering the auction.
    Keywords: Public procurement, Regulation on entry, Vertical and horizontal subcontracting/outsourcing, SMEs, Temporary consortium, Supply chain.
    JEL: H57 L23 L24 D44
    Date: 2017–06
  8. By: Gündüz, Yalin; Ongena, Steven; Tümer-Alkan, Günseli; Yu, Yuejuan
    Abstract: Does hedging motivate CDS trading and does that affect the availability of credit? To answer these questions we couple comprehensive bank-firm level CDS trading data from the Depository Trust and Clearing Corporation with the German credit register containing bilateral bank-firm credit exposures. We find that following the Small Bang in the European CDS market, extant credit relationships with riskier firms increase banks' CDS trading and hedging of these firms. Properly hedged banks holding more CDS contracts of riskier firms supply relatively more credit to these firms. Our results are overall stronger for firm CDSs experiencing larger improvements in liquidity.
    Keywords: credit default swaps,credit exposure,hedging,bank lending,Depository Trust and Clearing Corporation (DTCC)
    JEL: G21
    Date: 2017
  9. By: Hanousek, Jan; Shamshur, Anastasiya; Tresl, Jiri
    Abstract: Using a large sample of private firms over the period from 2001 to 2013, we study the effect of corruption uncertainty on corporate investments and cash holdings. We find that a higher uncertainty about the level of corruption is associated with lower corporate investments and lower cash holdings. These results are sensitive to the ownership structure of a firm. Firms with no foreign majority ownership appear to be more sensitive to corruption-induced uncertainty than majority-controlled foreign firms. They significantly decrease their investments and cash holdings. We hypothesize that they move their cash off-balance-sheet to create cash reserves as the uncertainty of when, whom, and how much to bribe increases.
    Keywords: cash holdings; corporate investment; Corruption; Europe; firms; panel data; uncertainty
    Date: 2017–06
  10. By: Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw); Jakub Mazurek (Group for Research in Applied Economics (GRAPE))
    Abstract: We provide an overview of gender board diversity in Europe, using an exceptional database of over 100 million firms over the period of two decades and a novel gender assignment. We show that women on supervisory boards reduce the likelihood that a woman is on a management board. In fact, as much as 90% of European corporations have no women on supervisory boards, whereas roughly 80% of them has no women on management boards. We also show that more gender equality at a country level is not conducive to greater gender board diversity.
    Keywords: glass ceiling, gender board diversity
    JEL: J7 P5
    Date: 2017
  11. By: Peter Blair (Clemson University); Bobby Chung (Clemson University)
    Abstract: In order to work legally, 29% of U.S. workers require an occupational license. We show that occupational licensing reduces the racial wage gap between white and black men by 43%, and the gender wage gap between women and white men by 36%-40%. For black men, a license is a positive indicator of non-felony status that aids in firm screening of workers, whereas women experience differentially higher returns to the human capital that is bundled with occupational licenses. The information and human capital content of licenses enable firms to rely less on race and gender as predictors of worker productivity.
    Keywords: wage inequality, statistical discrimination, occupational licensing, screening, signaling, optimal regulation
    JEL: D21 D84 J24 J31 J41 J70 K23 K31 L51
    Date: 2017–06
  12. By: Foros, Øystein (Dept. of Business and Management Science, Norwegian School of Economics); Nguyen, Mai Thi (Dept. of Business and Management Science, Norwegian School of Economics); Steen, Frode (Dept. of Economics, Norwegian School of Economics)
    Abstract: First, we analyze how regular days off from competition and a time-dependent price pattern affect firm performance. Second, we examine the effects on firms' profitability from consumers’ changing search- and timing behavior. We use microdata from gasoline retailing in Norway. Since 2004, firms have practiced an industry-wide day off from competition, starting on Mondays at noon, by increasing prices to a common level given by the recommended prices (decided and published in advance). Hence, firms know when and to what level to raise their price. In areas without local competition, retail prices are always equal to the recommended prices. Hinged on this, we regard recommended prices as the monopoly price level. In turn, a foreseeable low-price window is open before every restoration. During the data period, we observe an additional weekly restoration on Thursdays at noon. We show that an additional day off from competition increases firm performance. As expected, a conventional price search of where to buy reduces firms’ profitability. In contrast, consumers who are aware of the cycle and spend effort on when to buy have a positive impact on firms’ profitability. If consumers spend effort on when to buy rather than where to buy, price competition might be softened even in the low-price windows.
    Keywords: Consumer Behavior; Firm Performance; Gasoline Retailing
    JEL: L00
    Date: 2017–07–06
  13. By: Giuseppe Arcuri; Maurizio La Rocca; Nadine Levratto
    Abstract: This paper investigates the role of local context, with regard to the effect of local financial development and banking concentration, on a new firm’s probability of bankruptcy. Our empirical setting is based on the Logit Multilevel Model that better allows the treatment of data referring to different levels of aggregation (firm and local variables) applied to new firms located in Italian provinces. We find that a higher level of financial development in a province decreases the likelihood of a new firm’s bankruptcy. This result is robust considering a 2SLS regression in which we use instruments for the local financial development and for the concentration of bank branches. In addition, our estimations suggest that the effect of local financial development and bank concentration is shaped by size. Local financial development is particularly significant for small start-ups, which traditionally suffer from great difficulty in accessing credit, whereas local banking concentration reduces the probability of bankruptcy for large, new firms.
    Keywords: Probability of bankruptcy, new firms, multilevel model, local banking structure
    JEL: C26 C30 M13 R11
    Date: 2017

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