nep-bec New Economics Papers
on Business Economics
Issue of 2018‒09‒17
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Manager Characteristics and Firm Performance By KODAMA Naomi; Huiyu LI
  2. Corporate R&D and the performance of foodprocessing firms: Evidence from Europe, Japan and North America By Hockmann, Heinrich; Garzon Delvaux, Pedro Andres; Voigt, Peter; Ciaian, Pavel; Gomez y Paloma, Sergio
  3. Private information, price discrimination, and collusion By Peiseler, Florian; Rasch, Alexander; Shekhar, Shiva
  4. Learning from failure across products By Glauber, Johanna; Kretschmer, Tobias
  5. Survival of Service Firms in European Emerging Economies By Iwasaki, Ichiro; Kočenda, Evžen
  6. Road to Industrialized Africa: Role of Efficient Factor Market in Firm Growth By Manabu Nose
  7. The Middle Productivity Trap: Dynamics of Productivity Dispersion By Dany Bahar
  8. Business investment, cash holding and uncertainty since the Great Financial Crisis By Smietanka, Pawel; Bloom, Nicholas; Mizen, Paul
  9. Does cross-listing mitigate sub-optimal corporate investment? By Abed ALNasser Abdallah; Wissam Abdallah
  10. Clear and Close Competitors? : On the Causes and Consequences of Bilateral Competition between Banks By de Haas, Ralph; Lu, Liping; Ongena, S.R.G.
  11. Social Capital as Knowledge Absorptive Capacity and Firm Innovation By Ploychompoo Kittikunchotiwut

  1. By: KODAMA Naomi; Huiyu LI
    Abstract: This paper studies the relationship between the performance of a firm and the characteristics of its manager for private and public firms in Japan. We use a panel data of firms from 2006-2016 that covers over two-thirds of aggregate employment and is representative of the firm size distribution. We find that firm performance measures—size, growth, and sales per employee—are higher in firms with managers who are male, more educated, and whose self-reported hometown differs from the location of the firm he or she manages (migrant managers). We also find an inverted-U relationship between firm performance level and manager's age, and that growth rate declines with the manager's age. Firm performance first increases with age until middle age, after which it declines with age. However, managers with characteristics that are associated with good performance do not necessarily perform better in recessions: male and migrant managers cut back more on sales and employment during the 2008-2009 recession. These results hold even after controlling for firm characteristics such as industry, age, location, and family ownership. Our results are consistent with human capital and risk preference affecting the productivity of managers. They suggest that demographic shifts—aging, rising female labor participation and education attainment, change in migration patterns—may affect economic growth through the distribution of managerial productivity.
    Date: 2018–09
  2. By: Hockmann, Heinrich; Garzon Delvaux, Pedro Andres; Voigt, Peter; Ciaian, Pavel; Gomez y Paloma, Sergio
    Abstract: This paper investigates the impact of corporate research and development (R&D) on firm performance in the foodprocessing industry. We apply Data Envelopment Analysis (DEA) with two step bootstrapping using a corporate data for 307 food-processing firms from the EU, US, Canada and Japan for the period 1991–2009. The estimates suggest that R&D has a positive effect on the firms’ performance, with marginal gains decreasing in the R&D level as well as the performance differences are detected across regions and food sectors. R&D investments in food processing can deliver productivity gains, beyond the high-tech sectors generally favoured by innovation policy.
    Keywords: Research and Development/Tech Change/Emerging Technologies
    Date: 2017–08–28
  3. By: Peiseler, Florian; Rasch, Alexander; Shekhar, Shiva
    Abstract: We analyze firms' ability to sustain collusion in a setting in which horizontally differentiated firms can price-discriminate based on private information regarding consumers' preferences. In particular, firms receive private signals which can be noisy (e.g., big data predictions). We find that there is a non-monotone relationship between signal quality and sustainability of collusion. Starting from a low level, an increase in signal precision first facilitates collusion. However, there is a turning point from which on any further increase renders collusion less sustainable. Our analysis provides important insights for competition policy. In particular, a ban on price discrimination can help to prevent collusive behavior as long as signals are sufficiently noisy.
    Keywords: Big Data,Collusion,Loyalty,Private Information,Third-Degree Price Discrimination
    JEL: L13 D43 L41
    Date: 2018
  4. By: Glauber, Johanna; Kretschmer, Tobias
    Abstract: Learning rates for the same or similar products differ significantly across firms. One reason for this heterogeneity may be that most firms are multiproduct firms and that they learn both within and across the products they produce and sell. Moreover, the organization of production and the technological design of (families of) products may affect the extent of learning across products. We study learning from failures within and across products in the US automotive industry, using safety recalls as a particularly costly form of product failure. We find that firms indeed learn from failure across products, but learning is faster if products use a common technological platform or are produced in a common plant. Severe product failures involving a supplier also lead to increased across-product learning. Our results shed light on the characteristics of firms' learning from failure across products and extend the existing literature, which typically studies learning at the firm or the product level and thus misses out on an important channel for learning in manufacturing contexts.
    Keywords: Automotive Industry; Learning from Failure; Multiproduct Firms; Organizational Learning; Product Recalls
    JEL: L11 L23 L62 M11
    Date: 2018–08
  5. By: Iwasaki, Ichiro; Kočenda, Evžen
    Abstract: Using a dataset of 126,591 service firms in 17 European emerging economies, this paper aims to estimate firm survivability in the years 2007–2015 and examine its determinants. We found that 31.3%, or 39,557 firms, failed during the observation period. At the same time, however, the failure risk greatly differed among regions, perhaps due to the remarkable gap in the progress of economic and political reforms. Moreover, the results of survival analysis revealed that large shareholding, labor productivity, and firm age played strong roles in preventing business failure beyond differences in regions and sectors.
    Keywords: European emerging economies, Service industry, Survival analysis, Cox proportional hazards model
    JEL: D22 G01 G33 L89 P34
    Date: 2018–08
  6. By: Manabu Nose
    Abstract: After a decade of rapid growth, industrialization has lost ground with shrinking manufacturing sector and high informality in Sub-Saharan Africa (SSA). This paper explores how land market and labor regulations affect factor allocative efficiency and firm performance in SSA. Using pooled data on firm balance sheets for 40 countries in SSA, the results identify significant land and labor misallocations due to limited market allocation of land and inappropriate regulatory policies. Using variations in ethnic diversity and the intensity of regulatory actions to peer firms at subnational level as instrumental variables, local average treatment effects show large productivity gains from factor reallocations, especially for marginally productive firms. Panel data results for Nigerian firms confirm factor market inefficiency as a principal driver of declining productivity, while showing that the 2011 minimum wage reform increased firm size. The results imply that improving formal regulation is critical to support firm growth at the stage of weak legal capacity, while informal sector monitoring gets effective as legal capacity develops.
    Keywords: Africa;Firm growth, misallocation, land market, labor regulations, Labor Economics Policies, Labor Force and Employment, Size, and Structure, Labor Standards: Public Policy
    Date: 2018–08–06
  7. By: Dany Bahar (Center for International Development at Harvard University)
    Abstract: Using a worldwide firm-level panel dataset I document a "U-shaped" relationship between productivity growth and baseline levels within each country and industry. That is, fast productivity growth is concentrated at both ends of the productivity distribution. This result serves as a potential explanation to two stylized facts documented in the economic literature: the rising productivity dispersion within narrowly defined sectors, and the increasing market share of few yet highly productive firms.
    Keywords: productivity, convergence, divergence, dispersion
    JEL: D2 O3 O4
    Date: 2017–09
  8. By: Smietanka, Pawel (Bank of England); Bloom, Nicholas (Stanford University); Mizen, Paul (University of Nottingham)
    Abstract: The Lehman Brothers event in 2008 created a large uncertainty shock that triggered an economic slowdown lasting a decade. The macroeconomic effects are well documented, but the effect on business decisions much less so. In this paper, we explore corporate data to investigate how economic uncertainty affected investment, dividend payouts and cash holdings, based on over 10,000 UK firm-year observations. We offer new insights into the relationship between business decisions and uncertainty, by exploiting two surveys of macroeconomic uncertainty from professional forecasters and CFOs collected by the Bank of England. These data demonstrate that heightened economic uncertainty lowered investment even after controlling for investment opportunities, sales growth, and the firm’s own stock volatility. Economic uncertainty also explains the rise in cash holdings and the fall in payouts. Hence, our results help explain why UK firms invested so little and held so much cash at a time of historically low interest rates, and also why they paid out smaller dividends. These results may help explain recent sluggish productivity in the UK economy, and they also are important, because they provide a benchmark for future studies of Brexit-related uncertainty.
    Keywords: uncertainty; investment; cash holdings; dividend policy; survey forecasts
    JEL: E22 G31 G32 G35
    Date: 2018–08–24
  9. By: Abed ALNasser Abdallah (American University of Sharjah); Wissam Abdallah (Lebanese American University)
    Abstract: This paper examines whether managers of cross-listed firms improve corporate investment efficiency through learning from the stock market upon cross-listing. Using a sample of UK firms cross-listed on US regulated and unregulated stock markets, we find that cross-listed firms on unregulated markets invest more efficiently than non-cross-listed firms following cross-listing. The analysis of pre- and post-cross-listing shows that cross-listed firms improve their investment efficiency post cross-listing regardless of the location of cross-listing (i.e. regulated versus unregulated exchanges). Furthermore, we find firms with low level of private information embedded in their stock prices, and firms with higher board independence improve their investment post cross-listing. Our findings suggest that managers of cross-listed firms are guided by firm-specific characteristic more than by stock market signals when they embark on new investment projects. Moreover, we find evidence that cross-listed firms on regulated exchanges perform poorly after cross-listing, whereas those cross-listed on unregulated exchange experience high performance post cross-listing. This indicates that the listing and regulatory requirements imposed on cross-listed firms by the US Securities and Exchange Commission (SEC) do not effectively deter managers from investing in value-destroying projects.
    Keywords: Cross-listing, investment efficiency, stock market feedback, price informativeness
    JEL: G14 G31
    Date: 2018–06
  10. By: de Haas, Ralph (Tilburg University, Center For Economic Research); Lu, Liping (Tilburg University, Center For Economic Research); Ongena, S.R.G. (Tilburg University, Center For Economic Research)
    Abstract: We interview 361 European bank CEOs to identify their banks’ main competitors. We then provide evidence on the drivers of bilateral bank competition, construct a novel competition measure at the locality level, and assess how well it explains variation in firms’ credit constraints. We find that banks identify another bank as a main competitor in small-business lending when their branch networks overlap, when both are foreign owned or relationship oriented, or when the potential competitor has fewer hierarchical layers. Intense bilateral bank competition increases local credit constraints, especially for small firms, as competition may impede the formation of lending relationships.
    Keywords: bilateral bank competition; multimarket contact; credit constraints
    JEL: D22 D40 F36 G21
    Date: 2018
  11. By: Ploychompoo Kittikunchotiwut (Mahasarakham Business School)
    Abstract: The objective of the study is to investigate relationships amongst social capital, potential absorptive capacity, realized absorptive capacity, and firm innovation. The data were collected by using a questionnaire from 89 leather product exporting firms from leather products businesses in Thailand. The hypothesized relationships among variables are examined by using ordinary least square (OLS) regression analysis. The results indicate that social capital have are significant positive impact on potential absorptive capacity and realized absorptive capacity. Potential absorptive capacity and realized absorptive capacity have are significant positive impact on firm innovation. This study might be useful to scholars and those who share an interest in the subject. Moreover, theoretical and managerial contributions, conclusion, and suggestions for future research are also interesting to be discussed.
    Keywords: Social Capital, Potential Absorptive Capacity, Realized Absorptive Capacity, Firm Innovation
    JEL: L20 M19
    Date: 2018–07

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