nep-bec New Economics Papers
on Business Economics
Issue of 2019‒06‒24
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. The Intensive Margin in Trade By Fernandes, Ana M.; Klenow, Peter J.; Meleshchuk, Sergii; Pierola, Martha Denisse; Rodríguez-Clare, Andrés
  2. CEOs' Multicultural Experience, Firm Networks and Performance: Evidence from Firm-to-firm Transaction Data in Japan By ITO Tadashi; NAKAMURA Ryohei
  3. Efficiency Wages in Cournot-Oligopoly By de Pinto, Marco; Goerke, Laszlo
  4. Business Groups and the Incorporation of Firm-specific Shocks into Stock Prices By Mara Faccio; Randall Morck; M. Deniz Yavuz
  5. Bank Capital Requirements, Loan Guarantees and Firm Performance By Sergio Mayordomo; Antonio Moreno; Steven Ongena; Maria Rodriguez-Moreno
  6. Sticking around Too Long? Dynamics of the Benefits of Dual-Class Voting By Hyunseob Kim; Roni Michaely
  7. Firm Performance and Asymmetry of Supplier and Customer Relationships By FUJII Daisuke; SAITO Yukiko
  8. Topology and Formation of Production Input Interlinkages: Evidence from Japanese microdata By Yoshiyuki ARATA; Philipp MUNDT
  9. Do asset purchase programmes shape industry dynamics? Evidence from the ECB's SMP on plant entries and exits By Antoni, Manfred; Koetter, Michael; Müller, Steffen; Sondershaus, Talina
  10. The Gender Composition of Corporate Boards and Firm Performance: Evidence from Russia By Garanina, Tatiana; Muravyev, Alexander
  11. Revisiting the role of Imported intermediates on Productivity: A firm-level analysis for Uruguay By Pablo Blanchard; Adriana Peluffo; Dayna Zaclicever

  1. By: Fernandes, Ana M.; Klenow, Peter J.; Meleshchuk, Sergii; Pierola, Martha Denisse; Rodríguez-Clare, Andrés
    Abstract: The Melitz model highlights the importance of the extensive margin (the number of firms exporting) for trade flows. Using the World Bank’s Exporter Dynamics Database (EDD) featuring firm-level exports from 50 countries, we find that around 50% of variation in exports is along the extensive margin — a quantitative victory for the Melitz framework. The remaining 50% on the intensive margin (exports per exporting firm) contradicts a special case of Melitz with Pareto-distributed firm productivity, which has become a tractable benchmark. This benchmark model predicts that, conditional on the fixed costs of exporting, all variation in exports across trading partners should occur on the extensive margin. We find that moving from a Pareto to a lognormal distribution allows the Melitz model to match the role of the intensive margin in the EDD. We use likelihood methods and the EDD to estimate a generalized Melitz model with a joint lognormal distribution for firm-level productivity, fixed costs and demand shifters, and use “exact hat algebra” to quantify the effects of a decline in trade costs on trade flows and welfare in the estimated model. The welfare effects turn out to be quite close to those in the standard Melitz-Pareto model when we choose the Pareto shape parameter to fit the average trade elasticity implied by our estimated Melitz-lognormal model, although there are significant differences regarding the effects on trade flows.
    Keywords: Trade; Exports; Trade flows; Firms
    JEL: F1 F12
    Date: 2019–06
  2. By: ITO Tadashi; NAKAMURA Ryohei
    Abstract: This paper postulates a hypothesis that the more diverse background a firm CEO has, the more extended firm-to-firm networks the firm constructs, which in turns leads to higher firm performance. Using the firm level data of firm CEOs' backgrounds and firm-to-firm networks, this paper corroborates the hypothesis by showing that firms whose CEOs are non-local-born are more likely to have more extended firm-to-firm transaction networks and consequently have better firm performance. Aside from this main finding, it also finds that the CEOs' graduated schools' level in terms of difficulty of entrance exams, which we consider as a proxy for CEOs' innate ability, has a strong positive nexus with the firm performance. The finding suggests an importance of human resource mobilization for growth.
    Date: 2019–05
  3. By: de Pinto, Marco (IAAEU, University of Trier); Goerke, Laszlo (IAAEU, University of Trier)
    Abstract: In a Cournot-oligopoly with free but costly entry and business stealing, output per firm is too low and the number of competitors excessive, assuming labor productivity to depend on the number of employees only or to be constant. However, a firm can raise the productivity of its workforce by paying higher wages. We show that such efficiency wages accentuate the distortions occurring in oligopoly. Specifically, excessive entry is aggravated and the welfare loss due to market power rises.
    Keywords: oligopoly, efficiency wages, excessive entry, welfare
    JEL: D43 J31 L13
    Date: 2019–05
  4. By: Mara Faccio; Randall Morck; M. Deniz Yavuz
    Abstract: In lower-income economies, stocks exhibit less idiosyncratic volatility and business groups are more prevalent. This study connects these two findings by showing that business group affiliated firms’ stock returns exhibit less idiosyncratic volatility than do the returns of otherwise similar unaffiliated firms. Global commodity price shocks are common shocks that contribute to firm-level idiosyncratic risk because they affect industries heterogeneously. Idiosyncratic components of commodity shocks are incorporated less into idiosyncratic returns of group affiliates than unaffiliated firms in the same industry and economy. Identification follows from difference-in-difference tests exploiting successful and matched-exogenously-failed control block transactions.
    JEL: G14 G15 G32 G34 M41
    Date: 2019–05
  5. By: Sergio Mayordomo (Banco de España); Antonio Moreno (School of Economics and Business, University of Navarra); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)); Maria Rodriguez-Moreno (Banco de España)
    Abstract: This paper studies the effects of the bank capital requirements imposed by the European authorities in October 2011 on loan collateral and personal guarantees usage to enhance capital ratios. We use detailed information on the loan contracts granted by a representative Spanish bank and several subsidiaries to nonfinancial corporations around that date. We document that personal guarantees usage increases more than that of collateral, especially at subsidiaries with lower capital ratios. However, although the former type of guarantees demonstrably disciplined firms in their risk-taking before 2011, their subsequent overuse may have blunted their impact and may have even undermined firm performance and investment.
    Keywords: Banks, Asymmetric Information, Real Guarantees, Personal Guarantees, Risk Taking, Capital Requirements
    JEL: D43 E32 G21 G32
    Date: 2019–06
  6. By: Hyunseob Kim (Cornell University - Samuel Curtis Johnson Graduate School of Management); Roni Michaely (University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute)
    Abstract: Using a new dataset of corporate voting-rights from 1971 to 2015, we find that young dual-class firms trade at a premium and operate at least as efficiently as young single-class firms. As dual-class firms mature, their valuation declines, and they become less efficient in their margins, innovation, and labor productivity compared to their single-class counterparts. Voting premiums increase with firm age, suggesting that private benefits increase over maturity. Most sunset provisions that dual-class firms adopt are ineffective. Our findings suggest that effective, time-consistent sunset provisions would be based on age or on inferior shareholders’ periodic right to eliminate dual-class voting.
    Keywords: Dual class shares; Voting rights; Sunset provisions; Firm maturity
    JEL: G14 G18 G30
    Date: 2019–03
  7. By: FUJII Daisuke; SAITO Yukiko
    Abstract: This paper examines how transaction relationships are correlated with firm performance focusing on differences between supplier and customer relationships. In theory, both suppliers and customers positively affect sales and profit but their channels are different. A supplier set affects a firm's productivity lowering its marginal cost of production whereas a customer set only expands the size without affecting productivity. We consider a simple model of production with intermediate inputs, and examine whether theoretical implications are consistent with empirical evidence by estimating panel regressions using Japanese inter-firm transaction network data. We find that sales elasticities of in- and out-degree are positive. In- and out-degrees exhibit complementarity on sales implying that the marginal benefit of having more suppliers increases with the number of customers, and vice versa. Also, the elasticity of in-degree increases with size while that of out-degree is constant. This is also consistent with the theory, which predicts a leveraged effect of lowering a marginal cost when the scale is large.
    Date: 2019–04
  8. By: Yoshiyuki ARATA; Philipp MUNDT
    Abstract: Recent studies have emphasized the role of production input interlinkages in explaining a wide range of economic phenomena. In the vast majority of these studies, however, the input-output architecture is fixed and exogenously given, and hence relatively little is known about the evolution of the production network and the underlying mechanisms shaping its dynamics. Here we seek to fill this gap in the extant literature by studying the evolution of production input interlinkages on the most granular level of economic activity, building on a diverse set of more than 80,000 companies sampled across nearly all industries of the Japanese economy. We find that several network properties with a pronounced impact on shock propagation and the emergence of aggregate fluctuations are remarkably stable over time and invariant under the local link formation mechanism. To estimate the mechanism inducing this stability, we employ a stochastic actor-oriented model that resolves the problem of interdependent observations inherent to networked environments. This model approaches the dynamics of the production network from the perspective of individual firms whose myopic decisions to change their suppliers take into account the effect of direct connections and link externalities. Building on this approach, we find that topological features of the network such as network distance and the current number of relationships are a main driver of network dynamics in subsequent periods, and are quantitatively more important than productivity differentials.
    Date: 2019–04
  9. By: Antoni, Manfred; Koetter, Michael; Müller, Steffen; Sondershaus, Talina
    Abstract: Asset purchase programmes (APPs) may insulate banks from having to terminate relationships with unproductive customers. Using administrative plant and bank data, we test whether APPs impinge on industry dynamics in terms of plant entry and exit. Plants in Germany connected to banks with access to an APP are approximately 20% less likely to exit. In particular, unproductive plants connected to weak banks with APP access are less likely to close. Aggregate entry and exit rates in regional markets with high APP exposures are also lower. Thus, APPs seem to subdue Schumpeterian cleansing mechanisms, which may hamper factor reallocation and aggregate productivity growth.
    Keywords: plant exit,factor reallocation,asset purchase programmes
    JEL: E58 G21 G28 G33
    Date: 2019
  10. By: Garanina, Tatiana (University of Vaasa); Muravyev, Alexander (Higher School of Economics)
    Abstract: This paper studies economic effects of the gender composition of corporate boards, employing a new and unique longitudinal dataset of virtually all Russian companies whose shares were traded on the national stock market between 1998 and 2014. Using multiple identification approaches, alternative measures of gender diversity, and several performance indicators, we find some evidence that companies with gender-diverse boards have higher market values and better profitability. These effects are particularly pronounced when firms appoint several women directors, which is consistent with the critical mass theory. The effects appear to be stronger in bad economic times or for firms experiencing economic difficulties. Overall, the Russian data lend some support to "the business case" for more women on corporate boards.
    Keywords: board of directors, gender diversity, firm performance, Russia
    JEL: G34 J16
    Date: 2019–05
  11. By: Pablo Blanchard (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Adriana Peluffo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Dayna Zaclicever (Comisión Económica para América Latina)
    Abstract: International trade is considered a vehicle for technology diffusion, which in turn can induce productivity growth. Particularly, imports may give domestic firms access to a larger variety and/or better quality of intermediate or capital inputs in which new technologies are embodied. However, the lack of sufficiently skilled labor, an issue especially relevant for small developing countries, may prevent firms from taking advantage of these technologies. Using a panel of Uruguayan manufacturing firms for the period 1997-2008, we explore the impact of imported inputs on firms’ productivity and evaluate whether the effect is mediated by the firm’s absorptive capacity, proxied by the proportion of skilled labor. We use two alternative approaches. Firstly, we apply a two-stage approach by first estimating firms’ productivity and then using impact evaluation techniques to analyze causality between imported inputs and productivity. Secondly, we use a direct approach, estimating TFP with imported inputs as a state variable. Our results show that imported intermediates have an enhancing effect on Uruguayan firms’ productivity, and that absorptive capacity plays an important role on this effect.
    Keywords: productivity, imports, absorptive capacity
    JEL: F14 D24 O33
    Date: 2019–01

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