nep-bec New Economics Papers
on Business Economics
Issue of 2018‒04‒30
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. The Impact of Management Practices on SME Performance By Forth, John; Bryson, Alex
  2. Immigrant Entrepreneurship in America: Evidence from the Survey of Business Owners 2007 & 2012 By Sari Pekkala Kerr; William R. Kerr
  3. Firm-Level Financial Resources and Environmental Spills By Jonathan Cohn; Tatyana Deryugina
  4. Employment Protection and Firm Relocation: Theory and Evidence By Dewit, Gerda; Görg, Holger; Temouri, Yama
  5. Institutions and Determinants of Firm Survival in European Emerging Markets By Baumöhl, Eduard; Iwasaki, Ichiro; Kočenda, Evžen
  6. Workers, Firms and Life-Cycle Wage Dynamics By Bingley, Paul; Cappellari, Lorenzo
  7. Corporate Foreign Bond Issuance and Interfirm Loans in China By Yi Huang; Ugo Panizza; Richard Portes
  8. Industry window dressing By Chen, Huaizhi; Cohen, Lauren; Lou, Dong
  9. When Japanese Banks Become Pure Creditors: The effects of declining shareholding by banks on bank lending and firms’risk-taking By Ono, Arito; Suzuki, Katsushi; Uesugi, Iichiro
  10. Worker flows, entry, and productivity in New Zealand’s construction industry By Adam Jaffe; Nathan Chappell
  11. International Competition and Rent Sharing in French Manufacturing By Lionel Nesta; Stefano Schiavo

  1. By: Forth, John (National Institute of Economic and Social Research (NIESR)); Bryson, Alex (University College London)
    Abstract: We examine the impact of management practices on firm performance among SMEs in Britain over the period 2011-2014, using a unique dataset which links survey data on management practices with firm performance data from the UK's official business register. We find that SMEs are less likely to use formal management practices than larger firms, but that such practices have demonstrable benefits for those who use them, helping firms to grow and increasing their productivity. The returns are most apparent for those SMEs that invest in human resource management practices, such as training and performance-related pay, and those that set formal performance targets.
    Keywords: SMEs, small and medium-sized enterprises, employment growth, high-growth firms, productivity, workplace closure, management practices, HRM, recession
    JEL: L25 L26 M12 M52 M53
    Date: 2018–03
  2. By: Sari Pekkala Kerr; William R. Kerr
    Abstract: We study immigrant entrepreneurship and firm ownership in 2007 and 2012 using the Survey of Business Owners (SBO). The survival and growth of immigrant-owned businesses over time relative to native-founded companies is evaluated by linking the 2007 SBO to the Longitudinal Business Database (LBD). We quantify the dependency of the United States as a whole, as well as individual states, on the contributions of immigrant entrepreneurs in terms of firm formation and job creation. We describe differences in the types of businesses started by immigrants and the quality of jobs created by their firms. First-generation immigrants create about 25% of new firms in the United States, but this share exceeds 40% in some states. In addition, Asian and Hispanic second-generation immigrants start about 6% of new firms. Immigrant-owned firms, on average, create fewer jobs than native-owned firms, but much of this is explained by the industry and geographic location of the firms. Immigrant-owned firms pay comparable wages, conditional on firm traits, to native-owned firms, but are less likely to offer benefits.
    JEL: F22 J15 J44 J61 L26 M13 O31 O32 O33 R12
    Date: 2018–04
  3. By: Jonathan Cohn; Tatyana Deryugina
    Abstract: Using novel US environmental spill data, we document a robust negative relationship between the number of spills a firm experiences in a given year and its contemporaneous and lagged (but not future) cash flow. In addition, studying two natural experiments, we find an increase (decrease) in spills following negative (positive) shocks to a firm's financial resources, both in absolute terms and relative to control firms. Overall, our results suggest that firms' financial resources play an important role in their ability to mitigate environmental risk.
    JEL: G32 Q52 Q53
    Date: 2018–04
  4. By: Dewit, Gerda; Görg, Holger; Temouri, Yama
    Abstract: We examine the determinants of the decision to relocate activities abroad for firms located in OECD countries. We argue that particular firm-specific features play a crucial role for the link between employment protection and relocation. Stricter employment protection laws in the current production location discourage firms' relocation abroad. While larger, more productive firms and firms with higher labour intensities have, ceteris paribus, higher propensities to relocate, they also face higher exit barriers if the country from which they consider relocating has strict employment protection laws. Our predictions are supported empirically, using firm level data for 28 OECD countries.
    Keywords: Employment Protection,Relocation,Multinational Enterprises
    JEL: F23 L23 J88
    Date: 2018
  5. By: Baumöhl, Eduard; Iwasaki, Ichiro; Kočenda, Evžen
    Abstract: We analyze the impact of institutional quality on firm survival in 15 Central and Eastern European (CEE) countries. We employ the Cox proportional hazards model with a large dataset of firms from 2006–2015 and control for firm-specific determinants and country differences. Our results show that institutional quality (IQ) is a significant preventive factor for firm survival, and the result is robust to different measures of IQ and industry sectors. Furthermore, we document the existence of diminishing productivity of IQ, as the economic effect upon institutions is largest for low-level IQ countries and smallest for high-level IQ countries. In terms of firm-specific controls, ownership structure plays a vital role in strengthening the probability of firm survival. Notably, foreign ownership helps firms survive in all three country groups, and the effect is again larger for countries with low- and mid-level IQs. ROA, profit margin, solvency ratio, and firm age represent additional significant preventive factors, albeit with smaller economic effects.
    Keywords: firm survival, CEE countries, survival and exit determinants, hazards model
    JEL: D22 G01 G33 G34 P34
    Date: 2018–04
  6. By: Bingley, Paul (VIVE - The Danish Centre for Applied Social Science); Cappellari, Lorenzo (Università Cattolica del Sacro Cuore)
    Abstract: Studies of individual wage dynamics typically ignore firm heterogeneity, whereas decompositions of earnings into worker and firm effects abstract from life-cycle considerations. We study firm effects in individual wage dynamics using administrative data on the population of Italian employers and employees. We propose a novel identification strategy for firm-related wage components exploiting the informative content of the wage covariance structure of coworkers. Wage inequality increases three-fold over the working life; firm effects are predominant while young, but sorting of workers into firms becomes increasingly important, explaining the largest share of lifetime inequality. Static models that do not allow for life-cycle dynamics underestimate the importance of sorting and overstate match and firm effects.
    Keywords: wage inequality, wage dynamics, co-workers' covariance
    JEL: J24 J31
    Date: 2018–03
  7. By: Yi Huang; Ugo Panizza; Richard Portes
    Abstract: This paper uses firm-level data to document and analyze international bond issuance by Chinese non-financial corporations and the use of the proceeds of issuance. We find that dollar issuance is positively correlated with the differential between domestic and foreign interest rates. This interest rate differential increases the likelihood of dollar bond issuance by risky firms and decreases the likelihood of dollar bond issuance of exporters and profitable firms. Moreover, and most strikingly, we find that risky firms do more inter-firm lending than non-risky firms and that this lending rose significantly after the regulatory shock of 2008-09, when the authorities sought to restrict the financial activities of risky firms. Risky firms try to boost profitability by engaging in speculative activities that mimic the behavior of financial institutions while escaping prudential regulation that limits risk-taking by financial firms.
    JEL: F32 F34 G15 G30
    Date: 2018–04
  8. By: Chen, Huaizhi; Cohen, Lauren; Lou, Dong
    Abstract: We explore a new mechanism by which investors take correlated shortcuts and present evidence that managers—using sales management—take advantage of these shortcuts. Specifically, we exploit a regulatory provision wherein a firm's primary industry is determined by the highest sales segment. Exploiting this regulation, we provide evidence that investors classify operationally nearly identical firms as starkly different depending on their placement around this sales cutoff. Moreover, managers appear to exploit this by manipulating sales to be just over the cutoff in favorable industries. Further evidence suggests that managers engage in activities to realize large, tangible benefits from this opportunistic action.
    JEL: G00 G10 G32
    Date: 2016–12–01
  9. By: Ono, Arito; Suzuki, Katsushi; Uesugi, Iichiro
    Abstract: Utilizing the regulatory change relating to banks' shareholding in Japan as an instrument, this study examines the causal effects of declining shareholding by banks on bank lending and firms’ risk-taking. Banks may hold equity claims over client firms for either of the following two reasons: (i) gaining a competitive advantage by exploiting complementarity between shareholding and lending activities, and (ii) mitigating shareholder–creditor conflict. Exogenous reduction in a bank’s shareholding would then impair the competitiveness of the bank’s lending activities and aggravate the risk-taking behavior of client firms. Using a firm–bank matched dataset for Japan’s listed firms during the period 2001–2006, we empirically test these two hypotheses and obtain the following findings. First, after a bank’s removal from the list of major shareholders of a client firm, the bank’s share of the firm’s loans decreases. Second, volatility of a firm’s return on assets increases after the top shareholding bank is removed from the list of the firm’s major shareholders. Third, the negative impact of a bank’s removal from the list of major shareholders on bank lending mainly applies to non-main banks, while the positive impact of the top shareholding bank’s removal from the list of major shareholders on firms’ risk-taking mainly applies to main banks.
    Keywords: Bank shareholding, cross-selling, conflict of interest
    JEL: G21 G32 G34
    Date: 2018–03
  10. By: Adam Jaffe (Motu Economic and Public Policy Research and Queensland University of Technology); Nathan Chappell (Motu Economic and Public Policy Research)
    Abstract: We use administrative data on the population of New Zealand construction firms from 2001-2012, along with linked data on their employees and working proprietors, to study the relationships among worker flows, entry, and firm productivity. We find that job churn is prevalent in construction, with around 60 percent of firm-worker pairs not existing previously or not existing subsequently. The data also show that firms gaining or losing any labour are more productive than static firms, and that firms gaining labour from other construction firms are 4-6 percent more productive than the industry average in a given year. Our analysis suggests such firms are productive in part because of knowledge flows from other construction firms; in our preferred specification, with firm fixed effects, a standard deviation increase in the productivity of new employees’ previous firms is associated with a 0.6 percent increase in productivity. New entrants are more productive than pre-existing firms. Firms that enter briefly and disappear exhibit high productivity for that brief period, and firms that enter and persist exhibit a persistent productivity advantage that averages about 5%, but which grows as experience accumulates. The entry and worker-knowledge-flow phenomena are distinct, in that the entry effect is not explained by employee composition, and non-entrant firms also benefit from worker knowledge flows.
    Keywords: Firm productivity, firm churn, job churn, creative destruction, knowledge flows
    JEL: D24 L74 J63
    Date: 2018–02
  11. By: Lionel Nesta (Université Côte d'Azur; GREDEG CNRS; OFCE Sciences Po. Paris; SKEMA Business School); Stefano Schiavo (University of Trento; OFCE Sciences Po. Paris)
    Abstract: The paper investigates the impact of import competition on rent-sharing between firms and employees. First, by applying recent advances in the estimation of price-costs margins to a large panel of French manufacturing firms for the period 1993-2007, we are able to classify each firm into labor- and product-market regimes based on the presence/absence of market power. Second, we concentrate on dirms that operate in an efficient bargaining framework to study the effect of import penetration on workers' bargaining power. We find that French imports from other OECD countries have a negative effect on bargaining power, whereas the impact of imports from low wage countries is more muted. By providing firm-level evidence on the relationship between international trade and rent sharing, the paper sheds new light on the effect of trade liberalization on the labor market.
    Keywords: firm heterogeneity, import competition, mark-up, wage bargaining
    JEL: F14 F16 J50
    Date: 2018–04

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