nep-bec New Economics Papers
on Business Economics
Issue of 2017‒09‒03
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Firm Size and the Intensive Margin of Import Demand By Blaum, Joaquin; Lelarge, Claire; Peters, Michael
  2. Small and Large Firms over the Business Cycle By Neil Mehrotra; Nicolas Crouzet
  3. How Exporting Firms Respond to Technical Barriers to Trade? By Hu, Cui; Lin, Faqin; Tan, Yong; Tang, Yihong
  4. Firms' Costs, Profits, Entries, and Innovation under Optimal Privatization Policy By Haraguchi, Junichi; Matsumura, Toshihiro
  5. Firms and Shocks: Evidence from France By Natalia Ramondo
  6. What Drives the Gender Wage Gap? Examining the Roles of Sorting, Productivity Differences, and Discrimination By Sin, Isabelle; Stillman, Steven; Fabling, Richard
  7. The Fluidity of Inventor Networks By Michael Fritsch; Moritz Zoellner
  8. Beyond Dichotomy: The Curvilinear Impact of Employee Ownership on CEO entrenchment By Xavier Hollandts; Nicolas Aubert; Abdelmehdi Abdelhamid; Victor Prieur
  9. Corporate Governance Determinants of FII in Indian IT Firms By Panicker, Vidya; Mitra, Sumit; Sensarma, Rudra
  10. Profitable and desirable corporate environmentalism in a delegation contract under incentive subsidy on abatement technologies By Lee, Sang-Ho; Park, Chul-Hi
  11. Leverage and Deepening Business Cycle Skewness By Jensen, Henrik; Petrella, Ivan; Ravn, Søren Hove; Santoro, Emiliano
  12. Continuous Spatial Monopolistic Competition: Matching Goods With Consumers By Sergey Kokovin; Maxim Goryunov; Takatoshi Tabuchi

  1. By: Blaum, Joaquin; Lelarge, Claire; Peters, Michael
    Abstract: We use French microdata to test an ubiquitous property of firm-based models of importing. When firm efficiency is factor neutral and input prices and qualities are common across firms, firm size should have no effect on expenditure shares on the different products and varieties sourced, holding the extensive margin constant. We show that this property is not supported by the data. Holding the sourcing strategy fixed, we find that larger firms (i) have lower import shares, (ii) concentrate their import spending on their top varieties and (iii) pay higher prices for their imported inputs. Our findings imply that input trade, through the intensive margin, is less beneficial for larger firms. Our results are consistent with a complementarity between firm productivity and input quality.
    Keywords: Firm Heterogeneity; firm size; non-homothetic; trade in intermediate inputs
    JEL: D21 D22 D24 F11 F12 F14
    Date: 2017–08
  2. By: Neil Mehrotra (Brown University); Nicolas Crouzet (Northwestern University)
    Abstract: We analyze the behavior of small and large firms over the business cycle, using new firm-level quarterly data from the US Census Bureau covering the balance sheets and income statements of all firms in the US manufacturing sector. We find that sales, inventory growth, and investment rates are more cyclical among smaller firms. The differential cyclicality holds after controlling for industry effects, and is driven by the behavior of firms in the top 1\% of the asset distribution. We show that the result survives when directly controlling for firm leverage, liquidity, or bank dependency, suggesting that the excess cyclicality of small firms may not be driven by differences in access to credit. Additionally, we find that independent of size, firms with zero debt exhibit less sensitivity to the business cycle than positive leverage firms. Finally, we assess the importance of the excess cylicality of small firms for aggregate fluctuations in sales, inventory, and investment.
    Date: 2017
  3. By: Hu, Cui; Lin, Faqin; Tan, Yong; Tang, Yihong
    Abstract: This paper investigates how Technical Barriers to Trade (TBT) affect firm export performance. The implementation of the “Children-Resistance” act (CR act) in the EU offers an ideal quasi-natural experiment to identify the causal effect of TBTs on firm performance. Using data on Chinese firms that export cigarette lighters between 2004 and 2008, empirical results show that firms that export to the EU not only adjust their product quality to meet the requirements in the CR act, but also upgrade their product quality in other dimensions. However, both the export value and export volume to the EU decline. At the same time, less productive exporters are forced to exit from the EU market. In addition, while the effect of the CR act on export quality is significant only in the implementation year, its impact on firm-level export scale last longer even after its implementation, which is referred to as a dynamic impact. Lastly, Heterogeneous effect of TBT is also documented.
    Keywords: Technical barriers to trade; Children-Resistant Act; Difference in differences
    JEL: D21 F13 F14
    Date: 2017–08
  4. By: Haraguchi, Junichi; Matsumura, Toshihiro
    Abstract: We investigate how cost conditions of private firms affect optimal privatization policy and private firms' profits. We find that the optimal degree of privatization is decreasing with the costs of private firms unless the public firm is fully privatized in equilibrium. A cost reduction in a private firm increases the degree of privatization and benefits for all private firms. Therefore, each private firm's profit is increasing with its rival private firms' costs, which is in contrast to the result when the degree of privatization is given exogenously. This interesting property yields two important results. The profit of each private firm can increase with the number of private firms, and the positive externality of innovation accelerates private firms' R&D.
    Keywords: partial privatization, cost-reducing R&D, asymmetric private firms, constant marginal costs
    JEL: D43 H44 L33
    Date: 2017–08–22
  5. By: Natalia Ramondo (UCSD)
    Abstract: We document how different shocks affect firms of different characteristics. We use a rich panel data set of French firms that allows us to disentangle market-ofdestination shocks, country-of-origin shocks, as well as firm-specific shocks. We consider the differential impact of such shocks on firms of different characteristics: size, ownership status (domestic versus foreign), and international exposure (exporter versus non-exporters). We further exploit the panel dimension of the data by documenting the differential response to shocks when the firm changes status (e.g. non-exporter to exporter, domestic to foreign). The data span the period 1999-2007 and are the result of nesting several data sets on firms located in France: balance sheet data (called BRN), trade data (Custom authorities), and data on the firms’ ownership and their financial linkages (LiFi). The data are almost exhaustive. We follow the variance decomposition procedure proposed by Koren and Tenreyro (2008) to quantify the importance of the different sources of shocks on firms with different characteristics. We find that responses to different shocks are very heterogeneous across different groups of firms.
    Date: 2017
  6. By: Sin, Isabelle (Motu Economic and Public Policy Research Trust); Stillman, Steven (Free University of Bozen/Bolzano); Fabling, Richard (Independent Researcher)
    Abstract: As in other OECD countries, women in New Zealand earn substantially less than men with similar observable characteristics. In this paper, we use a decade of annual wage and productivity data from New Zealand's Linked Employer-Employee Database to examine different explanations for this gender wage gap. Sorting by gender at either the industry or firm level explains less than one-fifth of the overall wage gap. Gender differences in productivity within firms also explain little of the difference seen in wages. The relationships between the gender wage-productivity gap and both age and tenure are inconsistent with statistical discrimination being an important explanatory factor for the remaining differences in wages. Relating across industry and over time variation in the gender wage-productivity gap to industry-year variation in worker skills, and product market and labor market competition, we find evidence that is consistent with taste discrimination being important for explaining the overall gender wage gap. Explanations based on gender differences in bargaining power are less consistent with our findings.
    Keywords: gender wage gap, discrimination, sorting, productivity, competition
    JEL: J16 J31 J71
    Date: 2017–08
  7. By: Michael Fritsch (FSU Jena); Moritz Zoellner (Friedrich Schiller University Jena, School of Economics and Business Administration)
    Abstract: We investigate the stability of cooperative relationships between inventors and consequences for the characteristics and patent productivity of the respective regional innovation systems (RIS). The empirical analysis is for nine German regions over a period of 15 years. We find a rather high level of 'fluidity', i.e., entry and exit of actors, as well as instability of their relationships over time. The aggregate characteristics of the regional networks are, however, quite robust even with high levels of micro-level fluidity. There are both significantly positive and negative relationships between micro-level fluidity and the performance of the respective RIS.
    Keywords: Innovation networks, R&D cooperation, division of innovative labor, patents
    JEL: O3 R1 D2 D8
    Date: 2017–08–29
  8. By: Xavier Hollandts (CRCGM et IFGE - Kedge Business School - Kedge Business School); Nicolas Aubert (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université, INSEEC Business School - Institut des hautes études économiques et commerciales Business School (INSEEC)); Abdelmehdi Abdelhamid (CRCGM - Centre de Recherche Clermontois en Gestion et Management - Clermont Auvergne - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA - Université Clermont Auvergne); Victor Prieur (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Employee stock ownership gives employees a voice and therefore may have a major impact on corporate governance. Thus, employee stock ownership may be a powerful mean to protect CEOs from both market for corporate control and dismissal threat. In this paper, we examine the relationship between employee stock ownership and CEO entrenchment. Following the recent French legislative changes, we use a comprehensive panel dataset of the major French listed companies over the 2009-2012 period. We document inverted U shaped relationships between employee stock ownership and CEO entrenchment. Board employee ownership representation also plays a role and increases the inflexion points of these curvilinear relationship.
    Keywords: employee stock ownership,corporate governance,CEO entrenchment
    Date: 2017–06–07
  9. By: Panicker, Vidya; Mitra, Sumit; Sensarma, Rudra
    Abstract: The objective of this study is to investigate the impact of corporate governance characteristics on foreign investments in the Indian IT industry. Foreign capital is important for industries in an emerging economy as it bridges the gap between investment requirements and the domestically available capital. Prior research has shown that corporate governance characteristics of a firm can influence the FII inflow into it. The sample for this study consists of 113 firms from the Indian IT industry spanning 9 years from 2005 to 2013. The Indian IT industry was chosen as the setting for this study due to the increasing levels of FII inflow to these companies and because IT companies are among the pioneers in the formulation and implementation of corporate governance regulation in India. The ownership pattern of a firm, measured through parameters like its promoter shareholdings, and the corporate governance characteristics as indicated by the total number of directors in the board are analyzed to understand their impact on inflow of FII to the firms. A fixed effect regression was run on the sample and the results were analyzed. The results show that firms with more concentrated promoter holdings have lower levels of foreign investments. Larger board size seems to attract higher levels of foreign investments. However the number of independent members on board and the board chairman being independent have been found to be insignificant in determining FII inflow to a firm. Higher market capitalization and profitability help in attracting foreign investments. These results suggest the need for a strong current level of performance before inviting international investments for fund raising and also hints at a convergence in corporate governance of Indian IT firms towards the Anglo-Saxon system of corporate governance.
    Keywords: FII, Corporate governance, ownership patterns, board characteristics, Indian IT industry
    JEL: C33 G32
    Date: 2016–04
  10. By: Lee, Sang-Ho; Park, Chul-Hi
    Abstract: This study investigates corporate environmentalism in a managerial delegation contract and shows that a well-designed subsidy scheme can enhance business profitability and thus, an environmental policy could lead to both social and private benefits. This analysis allows us to better understand the Porter’s concept of environmental policy and firm’s profitability.
    Keywords: corporate environmentalism; environmental corporate social responsibility; managerial delegation contract; incentive subsidy scheme; Porter’s hypothesis
    JEL: L13 L21 M14
    Date: 2017–09–01
  11. By: Jensen, Henrik; Petrella, Ivan; Ravn, Søren Hove; Santoro, Emiliano
    Abstract: We document that the U.S. economy has been characterized by an increasingly negative business cycle asymmetry over the last three decades. This finding can be explained by the concurrent increase in the financial leverage of households and firms. To support this view, we devise and estimate a dynamic general equilibrium model with collateralized borrowing and occasionally binding credit constraints. Higher leverage increases the likelihood that constraints become slack in the face of expansionary shocks, while contractionary shocks are further amplified due to binding constraints. As a result, booms become progressively smoother and more prolonged than busts. We are therefore able to reconcile a more negatively skewed business cycle with the Great Moderation in cyclical volatility. Finally, in line with recent empirical evidence, financially-driven expansions lead to deeper contractions, as compared with equally-sized non-financial expansions.
    Keywords: Business Cycles; credit constraints; deleveraging.; Skewness
    JEL: E32 E44
    Date: 2017–08
  12. By: Sergey Kokovin (National Research University Higher School of Economics); Maxim Goryunov (National Research University Higher School of Economics); Takatoshi Tabuchi (University of Tokyo - Faculty of Economics)
    Abstract: Our new approach enriches the general additive monopolistic competition model (AMCM) - with a space of product characteristics: consumers' "ideal varieties". Unlike Hotelling, such partially localized competition involves intersecting zones of service among (continuously distributed) producers. Then, the uniform equilibrium firms' density increases with growing population, as with the usual AMCM. However, now increasing/decreasing prices are determined by the increasing/decreasing elasticity of elementary utility (instead of demand elasticity in AMCM). A new characteristic - the firm's range of service - decreases. Such finer matching between buyers and sellers becomes a new source of welfare gain from a thicker market, unlike the variety benefit in AMCM. The free-entry competition remains socially excessive under some natural preferences.
    Keywords: monopolistic competition, spatial competition, optimal product diversity, gains from trade, finer matching.
    JEL: L11 L13
    Date: 2017

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