nep-bec New Economics Papers
on Business Economics
Issue of 2018‒12‒03
ten papers chosen by
Vasileios Bougioukos
Bangor University

  1. Government Ownership, Firm Performance and Corporate Philanthropy in Thai Listed Firms By Usarat Thirathon; Suneerat Wuttichindanon
  2. Lending relationships and the collateral channel By Anderson, Gareth; Bahaj, Saleem; Chavaz, Matthieu; Foulis, Angus; Pinter, Gabor
  3. Environmental Pollution Policy of Small Businesses in Nigeria and Ghana: Extent and Impact By Uchenna Efobi; Tanankem Belmondo; Emmanuel Orkoh; Scholastica Ngozi Atata; Opeyemi Akinyemi; Ibukun Beecroft
  4. Corporate governance By Lehmann, Erik
  5. Platform Competition: Who Benefits from Multihoming? By Dana Kassem
  6. Corporate Social Responsibility and Tax Avoidance By Laszlo Goerke
  7. Does market size matter for charities By Lapointe, Simon; Perroni, Carlo; Scharf, Kimberley; Tukiainen, Janne
  8. Does Bank Efficiency Influence the Cost of Credit? By Anastasiya SHAMSHUR; Laurent WEILL
  9. Machines and Machinists: Importing Skill-Biased Technology By Miklós Koren; Márton Csillag
  10. Ownership structure of family business groups of Pakistan By SHAHID HUSSAIN; nabeel safdar

  1. By: Usarat Thirathon (Kasetsart University); Suneerat Wuttichindanon (Kasetsart University)
    Abstract: Studies in corporate social responsibility (CSR) have been tremendously conducted in both terms of CSR determinants and consequences. The results, however, are inconclusive yet. Rather using an aggregated score, this study focuses on one CSR strategy at a time. Philanthropy is focused because it is extensively chosen. Thailand is a Buddhist-based country and documented that philanthropy outstandingly appears. The disclosures on philanthropy activities are observed. Using a path analysis, this research found that philanthropy makes firm financial performance increased. Firm size and industry are important factors of philanthropy. Large firms and firms in high impact industry (i.e. oil and gas, and chemical) have a higher number of philanthropy activities. Government ownership, however, has no impact on philanthropy. The empirical findings support the corporate visibility as a determinant of CSR.
    Keywords: CSR in Thailand, philanthropy, CSR-CFP link
    JEL: M49
    Date: 2018–11
  2. By: Anderson, Gareth (Oxford University); Bahaj, Saleem (Bank of England); Chavaz, Matthieu (Bank of England); Foulis, Angus (Bank of England); Pinter, Gabor (Bank of England)
    Abstract: This paper shows that lending relationships insulate corporate investment from fluctuations in collateral values. We construct a novel database covering the banking relationships of private and public UK firms and their individual directors. The sensitivity of corporate investment to changes in real estate collateral values is halved when the relationship between a bank and a firm or its board of directors increases by 11 years. The importance of long bank-firm relationships diminishes when directors have personal mortgage relationships with their firm’s lender. Our findings support theories where collateral and private information are substitutes in mitigating credit frictions over the cycle.
    Keywords: Collateral; lending relationships; SMEs; information frictions
    JEL: E22 E32 G32
    Date: 2018–11–16
  3. By: Uchenna Efobi (Covenant University, Ota, Ogun State, Nigeria); Tanankem Belmondo (MINEPAT, Yaoundé, Cameroon); Emmanuel Orkoh (World Trade Organization, Geneva); Scholastica Ngozi Atata (Abeokuta, Nigeria); Opeyemi Akinyemi (Covenant University, Ota, Ogun State, Nigeria); Ibukun Beecroft (Covenant University, Ota, Ogun State, Nigeria)
    Abstract: This study provides a comprehensive assessment of firms’ operation and environmental protection polices in Nigeria and Ghana, where there has been a rising industrial growth amidst low regulatory and institutional frameworks. We analyze the extents to which firms’ adoption of environmental protection policies affect their performances. We use firm-level data of 842 firms (447 for Nigeria and 395 for Ghana) distributed across different regions of both countries for our descriptive and econometric estimations. We find, among other things, that firms’ adoption of internal policies on environmental protection is dismally low in both Nigeria (32 percent) and Ghana (17 percent), with policies focused on reducing solid (38 percent, Nigeria; and 35 percent, Ghana), gaseous (22 percent, Nigeria; and 44 percent, Ghana), and liquid (24 percent, Nigeria; and 14 percent, Ghana) pollution. Training appears to be an important intervention that can help improve firms’ adoption of such policies. We also found that firms’ adoption and implementation of environmental protection policies significantly improve their performance.
    Keywords: Environment; Green Industrialization; Performance; Pollution; Small Businesses; West Africa
    JEL: H32 L25 Q52 Q53
    Date: 2018–01
  4. By: Lehmann, Erik
    Abstract: Corporate governance is a recent concept that encompasses the costs caused by managerial misbehavior. Corporate governance is concerned with how organizations in general, and corporations in particular, produce value and how that value is distributed among the members of the corporation, its stakeholders. The interrelation of value production and value distribution links the ubiquitous technological aspect (the production of value) with the moral and ethical dimension (the distribution of value). Corporate governance is concerned with this link in general, but more specifically with the moral and ethical dimensions of distributing the generated value among the stakeholders. Value in firms is created by firm-specific investments, and the motivation and coordination of value enhancing activities and investment is protected by the power concentrated at the pyramidal top of the organization. In modern companies, it is the CEO and the top management deciding how to create value and how to distribute it among the relevant stakeholders. Due to asymmetric information and the imperfect nature of markets and contracts, adverse selection and moral hazard problems occur, where delegated (selected) managers could act in their own interest at the costs of other relevant stakeholders. Corporate governance is a two-tailed concept. The first aspect is about identifying the (most) relevant stakeholder(s), separating theory and practice into two different and conflicting streams: the stakeholder value approach and the shareholder value approach. The second aspect of the concept is about providing and analyzing different mechanisms, reducing the costs induced by moral hazard and adverse selection effects, and to balance out the motivation and coordination problems of the relevant stakeholders. Corporate governance is an interdisciplinary concept encompassing academic fields like finance, economics, accounting, law, taxation and psychology, among others. Like countries differ according to their institutions (i.e. legal and political systems, norms, and rules), firms differ according to their size, age, dominant shareholders or industries. Thus concepts in corporate governance differ along these dimensions as well. And while the underlying characteristics vary in time, continuously or as an exogenous shock, concepts in corporate governance are dynamic and static, offering a challenging field of interest for academics, policy makers and firm managers.
    Keywords: corporate Governance,principal agent theory,transaction costs,theory of the firm,moral hazard,adverse selection,managerial misbehavior,merger and acquisition,board of directors,remuneration
    JEL: G34 G20 L21
    Date: 2018
  5. By: Dana Kassem
    Abstract: I ask whether electrification causes industrial development. I combine newly digitized data from the Indonesian state electricity company with rich manufacturing census data. To understand when and how electrification can cause industrial development, I shed light on an important economic mechanism - firm turnover. In particular, I study the effect of the extensive margin of electrification (grid expansion) on the extensive margin of industrial development (firm entry and exit). To deal with endogenous grid placement, I build a hypothetical electric transmission grid based on colonial incumbent infrastructure and geographic cost factors. I find that electrification causes industrial development, represented by an increase in the number of manufacturing firms, manufacturing workers, and manufacturing output. Electrification increases firm entry rates, but also exit rates. Empirical tests show that electrification creates new industrial activity, as opposed to only reorganizing industrial activity across space. Higher turnover rates lead to higher average productivity and induce reallocation towards more productive firms in electrified areas. This is consistent with electrification lowering entry costs, increasing competition and forcing unproductive firms to exit more often. Without the possibility of entry or competitive effects of entry, the effects of electrification are likely to be smaller.
    JEL: D24 L60 O13 O14 Q41
    Date: 2018–11
  6. By: Laszlo Goerke
    Abstract: We theoretically analyse the relationship between Corporate Social Responsibility (CSR) and tax avoidance of an oligopolistic firm. The firm maximises a weighted sum of profits and a CSR objective which depends on output and the firm's contribution to public good provision, i.e. tax payments. Making one CSR element more important induces the firm to adhere less to the other and to reduce tax avoidance. Hence, simultaneously a substitutive and a complementary relationship between CSR and tax avoidance can be observed. Therefore, employing composite indicators of CSR prevents an empirical identification of this linkage. Moreover, if tax avoidance declines, CSR activities will increase. Consequently, the overall link between CSR and tax avoidance is theoretically ambiguous.
    Keywords: corporate social responsibility, public good, oligopoly, output, tax avoidance
    JEL: H26 L13 L31 M14
    Date: 2018
  7. By: Lapointe, Simon; Perroni, Carlo; Scharf, Kimberley; Tukiainen, Janne
    Abstract: We analyze implications of market size for market structure in the charity sector. While a standard model of oligopolistic for-profit competition predicts a positive relationship between market size and firm size, our analogous model of competition between prosocially motivated charities predicts no such correlation. If charities are biased towards their own provision, a positive association between market size and provider size can arise. We examine these predictions empirically for six different local charity markets. Our empirical findings suggest that charities do not solely pursue prosocial objectives, and that increased competition in the charity sector can lead to rationalization in provision
    Keywords: Competition in charity sectors; Market structure
    JEL: H41 L11 L13 L31 L33
    Date: 2018–12–01
  8. By: Anastasiya SHAMSHUR (University of East Anglia); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: Using a large sample of firms from nine European countries, this study examines the relationship between bank efficiency and the cost of credit for borrowing firms. We hypothesize that bank efficiency – the ability of banks to operate at lower costs – is associated with lower loan rates and thus lower cost of credit. Combining firm-level and bank-level data, we find support for this prediction. The effect of bank efficiency on the cost of credit varies with firm and bank size. Bank efficiency reduces the cost of credit for SMEs, but does not exert a significant influence for either micro companies or large firms. Furthermore, the effect is driven by large banks, where improvements in bank efficiency tend to be strongly associated with lower cost of credit. We also find that lower bank competition facilitates the transmission of greater bank efficiency to lower cost of credit. Overall, our results indicate that measures that increase bank efficiency can foster access to credit.
    Keywords: bank efficiency, cost of credit. Classification-JEL G21, L11.
    Date: 2018
  9. By: Miklós Koren; Márton Csillag
    Abstract: We build a model of technology choice with heterogeneous firms and workers to study how imported technology affects wages. Imported machines increase the productivity of worker-firm matches, but are more expensive than domestic ones. More productive firms and more skilled workers are hence more likely to use an imported machine. We study trade liberalization in the model, which makes imported machines cheaper. Both the direct and the equilibrium implications of trade liberalization increase the returns to skill. We use linked employer-employee data on Hungarian machine operators for 1992-2003 to test the predictions of the model. Machine operators exposed to imported machines earn higher wages than similar workers at similar firms. The returns to skill have increased in our sample between 1992 and 2000. A quarter of the increase can be attributed to greater exposure to imported machines. Our results suggest that imported machines can help propagate skill-biased technical change.
    Date: 2017–10–21
  10. By: SHAHID HUSSAIN (National University of Sciences and Technology (NUST), NUST Business School); nabeel safdar (National University of Sciences and Technology (NUST), NUST Business School)
    Abstract: This study analysis the family business groups ownership structure in the framework of corporate legal system, regulatory institutions and codes of corporate governance of Pakistan. The study uses unique handpicked data comprising a sample of 326 non-financial firms listed on Pakistan Stock Exchange for a period of 2009-13. The results reveal that Pakistani corporations have high degree of concentration of ownership. The controlling shareholders own about 87 % of firms with 10 % or more shareholding and 60 % of firms with 20 % or more shareholding. Most of the businesses are controlled by families. In 63 % of business group firms, families own 20 % or more top shareholdings. The novel contribution of the study is to develop the ownership structure of family businesses and measure the cash flow leverage, cash flow and voting rights of ultimate owners in family business groups. The study finds the considerable difference in voting and cash flow rights in family business group firms. This has strong implications for regulators, minority shareholders and dispersed investors.
    Keywords: ownership structure, business group, corporate governance, cash-flow rights, minority shareholders, voting rights, family business
    JEL: G32 G34 G38
    Date: 2018–06

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