nep-bec New Economics Papers
on Business Economics
Issue of 2019‒07‒15
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Temporal Disaggregation of Business Dynamics: New Evidence for U.S. Economy By Lorenza Rossi; Emilio Zanetti Chini
  2. The Role of Nonemployers in Business Dynamism and Aggregate Productivity By Pedro Bento; Diego Restuccia
  3. Corporate Social Responsibility and Firm Performance: Indian Evidence By Sudershan Kuntluru
  4. Employee wellbeing: the impact on productivity and firm performance By Jan-Emmanuel De Neve; Christian Krekel; George Ward
  5. CEO-Board Dynamics By John R. Graham; Hyunseob Kim; Mark T. Leary
  6. Bigger, Not Cleaner! Another Look at the Trade-Environment By Evangelina Dardati; Meryem Saygili
  7. Firm size, productivity and pay in today's service economy By Giuseppe Berlingieri; Sara Calligaris; Chiara Criscuolo
  8. Explaining the Persistent Effect of Demand Uncertainty on Firm Growth By Gigout, Timothee; Bricongne, Jean-Charles
  9. Nominee directors on the board and internationalization strategy: An institutional agency perspective By Vidya Sukumar Panicker; Sumit Mitra; Rajesh Srinivas Upadhyayula
  10. Impact of Corporate Governance Disclosures on Firm Performance By Sudershan Kuntluru
  11. What Skills Lead to Entrepreneurial Success? Evidence from Non-Farm-Household Enterprises in Indonesia By Niken Kusumawardhani; Daniel Suryadarma; Luca Tiberti; Veto Tyas
  12. Advertising and Markups: The Case of the German Brewing Industry By Simon Pröll; Giannis Karagiannis; Klaus Salhofer
  13. Foreign Production and Environment: Does the Type of FDI Matter? By Evangelina Dardati; Meryem Saygili

  1. By: Lorenza Rossi; Emilio Zanetti Chini
    Abstract: We provide new disaggregated data and stylized facts on firm dynamics of the U.S economy by using a state-space method to transform Census yearly data of entry and exit from 1977 to 2013 into quarterly frequency. Entry is lagging and symmetric, while exit is leading and asymmetric along the business cycle. We select the most significant determinants of these variables by matching Census data with a new database by Federal Reserve. These determinants differ considerably among entry and exit. Finally, standard macroeconometric models estimated on our disaggregated series support the recent theoretical literature, according to which the cleansing effect of recession is mainly due to exit asymmetry.
    Keywords: Bayesian VAR; Firms and Establishments; Productivity; State-Space Models
    JEL: C13 C32 C40 E30 E32
    Date: 2019–06
  2. By: Pedro Bento; Diego Restuccia
    Abstract: A well-documented observation of the U.S. economy in the last few decades has been the steady decline in the net entry rate of employer firms, a decline in business dynamism, suggesting a possible connection with the recent slowdown in aggregate productivity growth. We consider the role of nonemployers, businesses without paid employees, in business dynamism and aggregate productivity. Notwithstanding the decline in the growth of employer firms, we show that the total number of firms, which includes nonemployer businesses, has increased in the U.S. economy since the early 1980s. We interpret this trend, along with the evolution of the employment distribution across firms, through the lens of a standard theory of firm dynamics. The model implies that firm dynamics have contributed to an average annual growth rate of aggregate productivity of at least 0.26% since the early 1980s, over one quarter of the productivity growth of 1% in the data. Further, our implied measure of productivity growth moves closely over time with measured productivity growth in the data.
    JEL: E02 E1 O1 O4 O51
    Date: 2019–06
  3. By: Sudershan Kuntluru (Indian Institute of Management, Kozhikode)
    Abstract: With effect from 1 April 2014, India’s new Companies Act 2013 makes it mandatory for certain firms to spend a certain minimum amount on Corporate Social Responsibility (CSR) activities. In this study, the impact of mandatory CSR spending on firm performance is examined based on the data for 1460 firm years for the period 2015 to 2018. It is hypothesized that CSR spending has a positive impact on firm performance measured in terms of ROA and ROE. Logit and Probit models are used to estimate the impact of CSR on performance of firms. Contrary to the expectations, the empirical results show that CSR spending has negative impact on performance (ROA/ROE) subsequent to the CSR spending made mandatory in India. It implies that the mandatory CSR spending targets are at the expense of shareholders returns. The findings are useful to regulators, managers and investors.
    Keywords: Firm performance, Corporate Social Responsibility; Mandatory CSR, India
    Date: 2019–03
  4. By: Jan-Emmanuel De Neve; Christian Krekel; George Ward
    Abstract: Does having happier staff mean higher productivity and improvements in companies' bottom line? A study of over 1.8 million employees across 73 countries by Christian Krekel, George Ward and Jan-Emmanuel De Neve detects a strong positive correlation between employee wellbeing, productivity and firm performance.
    Keywords: employee satisfaction, engagement, employee productivity, firm performance, wellbeing, meta-analysis
    JEL: I31 J24
    Date: 2019–07
  5. By: John R. Graham; Hyunseob Kim; Mark T. Leary
    Abstract: We examine CEO-board dynamics using a new panel dataset that spans 1920 to 2011. The long sample allows us to perform within-firm and within-CEO tests over a long horizon, many for the first time in the governance literature. Consistent with theories of bargaining or dynamic contracting, we find board independence increases at CEO turnover and falls with CEO tenure, with the decline stronger following superior performance. CEOs are also more likely to be appointed board chair as tenure increases, and we find evidence consistent with a substitution between board independence and chair duality. Other results suggest that these classes of models fail to capture important elements of board dynamics. First, the magnitude of the CEO tenure effect is economically small, much smaller for example than the strong persistence in board structure that we document. Second, when external CEOs are hired, board independence falls and subsequently increases. Third, event studies document a positive market reaction when powerful CEOs die in office, consistent with powerful CEOs becoming entrenched.
    JEL: B26 G3 J3 M12
    Date: 2019–06
  6. By: Evangelina Dardati (Economics Department, Universidad Alberto Hurtado); Meryem Saygili (Department of Social Sciences, The University of Texas at Tyler)
    Abstract: In this paper, we use microdata from Chile to examine the relationship between export status and the environmental performance of firms. We proxy environmental performance by measures of emission intensity. We find that the correlation between export status and emission intensity depends on how the latter is measured. In particular, we find that export status is negatively correlated with emission intensity when we define emission intensity as emissions over sales, but it is uncorrelated when we use value added instead of sales. The difference between those two variables is that value added excludes the value of materials that the firm gets from other sources (outsourcing). Those intermediate inputs entail emissions that do not belong to the firm. Our data show that outsourcing is positively correlated with export status. Thus, using sales as an output measure overestimates firm activity, and, hence, exporters look cleaner than they actually are. We show, more formally, why the distinction between sales and value added is important, using a simple firm-level emission decomposition.
    Keywords: Emission intensity, export status, foreign ownership, productivity, outsourcing.
    Date: 2019–04
  7. By: Giuseppe Berlingieri; Sara Calligaris; Chiara Criscuolo
    Abstract: The evidence that bigger firms pay higher wages and have higher productivity is based mainly on manufacturing, which is only a small share of today's economy. Giuseppe Berlingieri, Sara Calligaris and Chiara Criscuolo reveal that while the size premia for both wages and productivity are significantly weaker in market services than in manufacturing, the link between wages and productivity is stronger.
    Keywords: productivity, size-premium, wages
    JEL: E2 D2 J3
    Date: 2019–07
  8. By: Gigout, Timothee; Bricongne, Jean-Charles
    Abstract: We study the effect of demand uncertainty on firm growth. We use product-level bilateral trade data to build an exogenous firm-level measure of the uncertainty of demand shocks. We match it with exhaustive custom and fiscal data between 1996 and 2013. An increase in uncertainty has a negative and persistent impact on the growth of exposed firms. This suggests a different underlying mechanism from a simple real-option effect. Financially constrained firms experience a much sharper and longer slowdown. Sectoral comovement is also a key factor explaining the persistent effect of uncertainty.
    Keywords: Uncertainty; demand shock; Firm-level; Dynamics; Heterogeneity.
    JEL: D22 D81 F23
    Date: 2019–05–01
  9. By: Vidya Sukumar Panicker (Loughborough University, School of Business and Economics, UK); Sumit Mitra (Indian Institute of Management, Kozhikode); Rajesh Srinivas Upadhyayula (Indian Institute of Management, Kozhikode)
    Abstract: Extant literature on Corporate Governance predominantly examines the characteristics of Anglo-Saxon system of corporate governance. Hence, studies examining governance of firms often employ the agency theory. However, recent studies argue that the behaviour of principals and agents is shaped by the institutional logics and consequently Anglo-Saxon institutional logic based agency theory may not be applicable in other contexts. Hence, studies examined the role of institutions in shaping various actors and the decisions of the firms. In this study, we examine a specific feature in the Indian Corporate Governance context i.e., nominee directors on the board. On a sample of 764 unique firms and 4216 firm year observations spanning the period 2006-2017, we find that the nominee directors are negatively associated with internationalization of emerging economy firms. In addition, we also find that the nominee directors positively moderate the relationship between family ownership and internationalization whereas it negatively moderates the relationship between foreign institutional investors and banks on the international investments of emerging economy firms. In this manner, we contribute to the institutional agency theory by arguing that institutional logics shape the internationalization decisions of emerging market firms.
    Keywords: Internationalization strategy, Nominee directors
    Date: 2019–03
  10. By: Sudershan Kuntluru (Indian Institute of Management, Kozhikode)
    Abstract: Corporate Governance disclosure practices are the subject of academic, professional and regulator debate. In this study, we examine the impact of corporate governance disclosures on firm performance in India. Unlike most of the existing literature, the corporate governance disclosures score is computed based on the Clause 49 of the listing agreements of SEBI for the period 2006-2016. It is a handpicked data from the annual reports disclosures made under the corporate governance section. We apply fixed effect regression model to examine the impact of corporate governance disclosures on firm performance. The performance is measured in in terms of operating, financial and market performance. It is found that corporate governance disclosures have positive and significant impact on market performance of the firms. Thus, the companies that comply with regulatory requirements of corporate governance disclosures achieve higher market performance. The study also finds that corporate governance disclosures have positive impact on firm’s operating performance and a negative impact on firm’s financial performance. The findings are useful to policy makers, managers, analysts and investors and also provide scope for future research.
    Keywords: Market Performance, Corporate Governance disclosures; Firm performance; Clause 49; SEBI; India
    Date: 2019–03
  11. By: Niken Kusumawardhani; Daniel Suryadarma; Luca Tiberti; Veto Tyas
    Abstract: The abundance of small enterprises in developing countries has led to debates regarding the role that of entrepreneurial skill in business performance. Analyses of the skills and characteristics important for success can inform entrepreneurship training programs or educational curricula designed to increase the number of successful entrepreneurs. We addressed these issues in the context of Indonesia, a low-middle-income country in which almost half of workers are self-employed. After developing a conceptual framework linking fluid intelligence, crystallized intelligence, and educational attainment, we estimated the effect of these different types of intelligence on the profit and value of non-farm-household businesses. We found that fluid intelligence had sizeable and positive returns on business. On the other hand, crystallized intelligence had a positive and large effect only in sectors that required intense concentration or computers. Some heterogeneous effects regarding business size were also found. Our results were robust when we controlled for possible selection into non- farm entrepreneurship.
    Keywords: cognitive skills, human capital, entrepreneurship, household firm, farm business, non-farm business
    JEL: J24 O15 L26
    Date: 2019
  12. By: Simon Pröll (University of Natural Resources and Life Sciences Vienna, Institute of Sustainable Economic Development); Giannis Karagiannis (University of Macedonia, Department of Economics); Klaus Salhofer (University of Natural Resources and Life Sciences Vienna, Institute of Sustainable Economic Development)
    Abstract: The beer market in Germany may be described as a monopolistic competition with many breweries supplying a very large variety of different beer styles and brands. Advertising is one means of differentiating a product and increasing prices over marginal costs. Based on production data obtained from a sample of 197 German breweries and thirteen years of observation, we derive firm-specific markups, profit ratios and prices in each year and relate those to their advertising expenditures and firm size. We are able to show that advertising expenditures are positively correlated to a brewery’s markup, profit ratio and price while firm size is negatively correlated.
    Keywords: advertising, markup, imperfect competition, brewing
    JEL: D22 L11 L66
    Date: 2019–07
  13. By: Evangelina Dardati (Economics Department, Universidad Alberto Hurtado); Meryem Saygili (Department of Social Sciences, The University of Texas at Tyler)
    Abstract: We use microdata from Chile to examine the relationship between foreign ownership and the environmental performance of firms. We make a distinction between exporting vs. non-exporting foreign firms. We proxy environmental performance by a measure of emission intensity. We find that foreign firms that serve only the domestic markets have higher emission intensity than foreign exporters.
    Keywords: Emission intensity, export status, foreign ownership.
    Date: 2019–02

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