nep-bec New Economics Papers
on Business Economics
Issue of 2018‒09‒24
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Firm Failure in Russia during Economic Crises and Growth : A Large Survival Analysis By Iwasaki, Ichiro; Kim, Byung-Yeon
  2. The Trade Effects of Anti-Dumping Duties: Firm-Level Evidence from China By Gabriel Felbermayr; Alexander-Nikolai Sandkamp
  3. Trade Liberalization, Technology Diffusion, and Productivity By Kishi, Keiichi; Okada, Keisuke
  4. Market Size and Entry in International Trade: Product Versus Firm Fixed Costs By Walter Steingress
  5. The Double-Edged Sword of Global Integration: Robustness, Fragility \& Contagion in the International Firm Network By Everett Grant
  6. The Great Recession and a Missing Generation of Exporters By William F. Lincoln; Andrew H. McCallum; Michael Siemer
  7. A Quantitative Model of Bubble-Driven Business Cycles By Benjamin Larin
  8. Divisional Buyouts by Private Equity and the Market for Divested Assets By Hege, Ulrich; Lovo, Stefano; Slovin, Myron B.; Sushka, Marie E.
  9. Corporate governance and life-cycles in emerging markets By Thomas O’Connor; Omar A. Esqueda
  10. Are business cycles within the firm? On the reallocation of financial funds across establishments within firms By Matthias Kehrig
  11. Middle managers, personnel turnover and performance: A long-term field experiment in a retail chain By Friebel, Guido; Heinz, Matthias; Zubanov, Nick
  12. Demand Elasticities, Nominal Rigidities and Asset Prices By Nuno Clara

  1. By: Iwasaki, Ichiro; Kim, Byung-Yeon
    Abstract: In this paper, we trace the survival status of more than 110,000 Russian firms in the years of 2007–2015 and examine the determinants of firm survival across periods of economic crisis and growth. Applying the Cox proportional hazards model, we find that the effects of some variables regarded as key determinants of firm survival are not always robust across business cycles. Among the variables that constantly affect firm survival across business cycles and industries, concentration of ownership, the number of board directors and auditors, firm age, and business network are included. By contrast, the effects of some ownership-related variables on firm survival vary depending on the nature of economic recessions such as a global crisis and a local one. There is also evidence that an international audit firm increases the probability of firm survival; however, gaps in the quality between international audit firms and those from Russia decrease over time. These findings suggest that one should not make hasty generalizations regarding the determinants of firm survival by looking at a specific economic period or industry.
    Keywords: Firm failure, Economic crises and growth, Cox proportional hazards model, Russia
    JEL: D22 G01 G33 G34 P34
    Date: 2018–06
  2. By: Gabriel Felbermayr; Alexander-Nikolai Sandkamp
    Abstract: This paper uses Chinese customs data to investigate the trade effects of anti-dumping (AD) policies. Merging firm-level exports to firm-specific AD duties, we exploit differences across firms within products. This reduces endogeneity concerns which have plagued earlier research. Based on a firm-level gravity model, we find that, in line with literature, AD duties reduce exports, induce firm exit but do not affect producer prices. However, our strategy yields substantially larger estimates which differ strongly across sectors. More interestingly, imports to the EU react differently compared to those to the US; a finding with obvious implications for the design of AD policies. Smaller exporters are more heavily affected than larger ones, suggesting important within-industry reallocation effects. Moreover, we find evidence for trade deflection as AD duties lead to market entry of Chinese firms into third countries.
    Keywords: anti-dumping, China, trade, firm heterogeneity
    JEL: F12 F13 F14 D22
    Date: 2018
  3. By: Kishi, Keiichi; Okada, Keisuke
    Abstract: This study develops the international trade theory of technology diffusion with heterogeneous firms. Each new entrant randomly searches for and meets incumbents and then adopts their existing technology. As in previous international trade models based on firm heterogeneity, trade liberalization induces the least productive firms to exit, and then the resources can be reallocated toward more productive firms. However, we show that this resource reallocation effect is mitigated by the entry of low-productive firms. Trade liberalization facilitates the diffusion of existing low-productive technologies to new entrants, which shifts the weight in the productivity distribution from the upper tail area to the area around the least productivity. Thus, some resources can be reallocated toward low-productive firms. In addition, trade liberalization reduces domestically produced varieties. Consequently, we show the non-monotonic relationship between trade liberalization and aggregate productivity.
    Keywords: International trade; Innovation; Productivity distribution
    JEL: F12 L11 O33
    Date: 2018–08
  4. By: Walter Steingress
    Abstract: This paper develops a theoretical framework to infer the nature of fixed costs from the relationship between entry patterns in international markets and destination market size. If fixed costs are at the firm level, firms take advantage of an intrafirm spillover by expanding firm-level product range (scope). Few firms enter with many products and dominate international trade. If fixed costs are at the product level, an interfirm spillover reduces the fixed costs to export for all firms producing the product. Using cross-country data on firm and product, I find empirical evidence consistent with product-level costs. More firms than products enter in larger markets, offering their consumers lower prices and a greater variety of goods within the product category.
    Keywords: Firm dynamics, International topics, Trade Integration
    JEL: F12 F14 F23
    Date: 2018
  5. By: Everett Grant (Federal Reserve Bank of Dallas)
    Abstract: We use daily equity returns to estimate global inter-firm networks across all major industries from 1981-2016 and test whether the network is robust or fragile, relating multinational firms' overall health with global integration. More connected firms are less likely to be in distress and have higher profit growth and equity returns, but are also more exposed to direct contagion from distressed neighboring firms and network level crises. Our machine learning analysis reveals the centrality of finance in the international firm network and increased globalization over time, with greater potential for crises to spread globally when they do occur.
    Date: 2018
  6. By: William F. Lincoln; Andrew H. McCallum; Michael Siemer
    Abstract: The collapse of international trade surrounding the Great Recession has garnered significant attention. This paper studies firm entry and exit in foreign markets and their role in the post-recession recovery of U.S. exports using confidential microdata from the U.S. Census Bureau. We find that incumbent exporters account for the vast majority of the decline in export volumes during the crisis. The recession also induced a missing generation of exporters, with large increases in exits and a substantial decline in entries into foreign markets. New exporters during these years tended to have larger export volumes, however, compensating for the decline in the number of exporting firms. Thus, while entry and exit were important for determining the variety of U.S. goods that were exported, they were less important for the trajectory of aggregate foreign sales.
    Keywords: entry, exit, business cycles, exports, firm dynamics, recession, financial crisis
    JEL: F10 F40 E32 E44 J2
    Date: 2018–08
  7. By: Benjamin Larin (Leipzig University)
    Abstract: The 2007-2008 financial crisis highlighted that a turmoil in the financial sector including bursting asset price bubbles can cause pronounced and persistent fluctuations in real economic activity. This motivates the consideration of evolving and bursting asset price bubbles as another source of fluctuations in a business cycle model. In this paper rational asset price bubbles are therefore incorporated into a life-cycle RBC model as first developed by Rı́os-Rull (1996). The calibration of the model to the post-war US economy and the numerical solution show that the model is able to generate plausible bubble-driven business cycles – economic fluctuations caused by evolving and bursting asset price bubbles.
    Date: 2018
  8. By: Hege, Ulrich; Lovo, Stefano; Slovin, Myron B.; Sushka, Marie E.
    Abstract: We study the role and performance of private equity (PE) in corporate asset sales. Corporate sellers obtain significantly positive excess returns in PE deals, gains in wealth significantly greater than for intercorporate asset sales. Based on exit valuations for 98% of PE deals, we find gains in enterprise value in buyouts are significantly greater than for benchmark firms. Corporate seller excess returns are positively correlated with subsequent gains in asset enterprise value. A parsimonious auction model suggests that only restructuring capabilities of PE (not acquisition of undervalued assets) can explain the pattern of the gains generated in these PE deals.
    Keywords: Divisional buyouts; asset sales; private equity; restructuring; auction
    JEL: G32 G34
    Date: 2018–08
  9. By: Thomas O’Connor (Department of Economics, Finance and Accounting, Maynooth University.); Omar A. Esqueda (College of Business Administration,Tarleton State University, W. Washington St. Stephenville, USA.)
    Abstract: Whereas the corporate life-cycle hypothesis posits that firms follow a structured set of goals along the life-cycle, some authors argue that corporate governance objectives vary independently of predetermined life-cycle stages. This study examines the impact of the corporate life-cycle on corporate governance in a special setting where firms can self-select into stricter rules by adopting an exchange listing level that fits the governance needs of the organization independently of the previously believed life-cycle requirements. Firms signal improvements in corporate governance by self-selecting into a more stringent listing level. The listing-level decision is a better predictor of corporate governance quality than corporate life-cycle. Firms indicate changes in corporate governance objectives by listing at the degree of regulation scrutiny that fits their current governance needs. The exchange listing level is a strong predictor of board structure quality, shareholder protection, disclosure requirements, and ownership structure. Firms determine the degree of regulation that matches the specific requirements at any point during their life-cycle.
    Date: 2018
  10. By: Matthias Kehrig (Duke University)
    Abstract: This paper considers the reallocation of financial funds across establishments within a firm for investment purposes. A new metric is constructed that contrasts investment needs with financial means at the establishment and firm levels. Within a firm, some establishments are net contributors to financial means for investment purposes while others receive funds in order to invest. Both financial reallocation between firms and reallocation across establishments within firms are strongly countercyclical. But within-firm reallocation is about six times as high as the between-firm analogue and also more volatile. The evidence suggests that internal capital markets are an important determinant in a firm's investment policies.
    Date: 2018
  11. By: Friebel, Guido; Heinz, Matthias; Zubanov, Nick
    Abstract: In a field experiment, a large retail chain's CEO asked managers of treated stores "to do what they can" to reduce personnel turnover. Turnover decreases by a quarter for nine months; a reminder treatment triggers a similar decrease for a shorter period. Treated managers report shifting their time toward HR; their employees report more managerial attention and support. Store sales are unaffected, indicating that the possible performance increases related to managers spending more time on HR are neutralized by the effects of managers spending less time on customers and goods. The discernible efficiency gains occur at the firm, rather than at the store level.
    Keywords: communication; hierarchy; HR; insider econometrics; Managers; organizations; personnel turnover; randomized controlled trial (RCT)
    JEL: L2 M1 M12 M5
    Date: 2018–08
  12. By: Nuno Clara (London Business School)
    Abstract: This paper examines the joint implications of heterogeneous demand elasticities and nominal rigidities to firm fundamentals and asset prices. Nominal rigidities create operational leverage in firms and therefore create a role for demand elasticity to matter for cross-sectional differences in firm fundamentals and asset prices. I develop a novel method to estimate demand elasticities at the firm level by using high frequency Amazon product data. I find that firms with more elastic demands have lower markups and earn a return premium of 6.2% over firms with more inelastic demands. These results are consistent with a multi-sector new-keynesian model where firms face both different demand elasticities and nominal rigidities.
    Date: 2018

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