nep-bec New Economics Papers
on Business Economics
Issue of 2019‒10‒21
ten papers chosen by
Vasileios Bougioukos
Bangor University

  1. Does Costly Reversibility Matter for U.S. Public Firms? By Hang Bai; Erica X.N. Li; Chen Xue; Lu Zhang
  2. Board Quotas and Director-Firm Matching By Daniel Ferreira; Édith Ginglinger; Marie-Aude Laguna; Yasmine Skalli
  3. The role of preferences, attitudes, and personality traits in labor market matching By Haylock, Michael; Kampkötter, Patrick
  4. History Dependence, Cohort Attachment, and Job Referrals in Networks of Close Relationships By Ayal Y. Chen-Zion; James E. Rauch
  5. Taxation and Supplier Networks: Evidence from India By Gadenne, Lucie; Nandi, Tushar; Rathelot, Roland
  6. Works Councils and Performance Appraisals By Grund, Christian; Sliwka, Dirk; Titz, Krystina
  7. Firm acquisitions by family firms: A mixed gamble approach By Hussinger, Katrin; Issah, Abdul-Basit
  8. The Risk Weighted Ownership Index: an ex-ante measure of banks' risk and performance By Luca Bellardini; Pierluigi Murro; Daniele Previtali
  9. Procuring Medical Devices: Evidence from Italian Public Tenders By Vincenzo Atella; Francesco Decarolis
  10. Exchange Rate Sensitivity of Firm Value : Recent Evidence from Non-Financial Firms Listed on Borsa Istanbul By Ibrahim Ethem Guney; Abdullah Kazdal; Doruk Kucuksarac; Muhammed Hasan Yilmaz

  1. By: Hang Bai; Erica X.N. Li; Chen Xue; Lu Zhang
    Abstract: Yes, most likely. The firm-level evidence on costly reversibility is even stronger than the prior evidence at the plant level. The firm-level investment rate distribution is highly skewed to the right, with a small fraction of negative investments, 5.79%, a tiny fraction of inactive investments, 1.46%, and a large fraction of positive investments, 92.75%. When estimated via simulated method of moments, the standard investment model explains the average value premium, while simultaneously matching the key properties of the investment rate distribution, including the cross-sectional volatility, skewness, and the fraction of negative investments. The combined effect of costly reversibility and operating leverage is the key driving force behind the model’s quantitative performance.
    JEL: E22 E44 G12 G14 G31
    Date: 2019–10
  2. By: Daniel Ferreira (CEPR - Center for Economic Policy Research - CEPR); Édith Ginglinger (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique); Marie-Aude Laguna (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique); Yasmine Skalli (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We study the impact of board gender quotas on the labor market for corporate directors. We find that the annual rate of turnover of female directors falls by about a third followingthe introduction of a quota in France in 2011. This decline in turnover is more pronounced for new appointments induced by the quota, and for appointments made by firms that regularly hire directors who are members of the French business elite. By contrast, the quota has no effect on male director turnover. The evidence suggests that, by changing the director search technology used by firms, the French quota has improved the stability of director-firm matches.
    Keywords: labour market,corporate directors,gender quotas
    Date: 2019–01
  3. By: Haylock, Michael; Kampkötter, Patrick
    Abstract: We provide new evidence of worker-firm matching based on preferences, attitudes and personality traits using new, representative matched employer-employee data from Germany. Time-constant firm characteristics explain a significant proportion of total variance in a series of outcome variables commonly applied in behavioral economics research. Hence, behavioral characteristics play an important, yet under researched, role in the labor market matching process.
    Keywords: Preferences,Attitudes,Personality,Sorting,Matching
    JEL: D90 D91 J01 M50
    Date: 2019
  4. By: Ayal Y. Chen-Zion; James E. Rauch
    Abstract: We model network formation in a firm. Agents learn about the quality of their working relationships with each other. Their good relationships become their networks. Accumulating relationships becomes increasingly costly, however. Over time agents become less open to forming relationships with others unknown to them, leading their networks to be front-loaded with agents they met near the beginning of their careers. The interaction of this dynamic with turnover yields predictions about the time pattern of history dependence in an agent’s network as a function of his tenure. Mutual openness of newly arrived agents in a firm also leads to the cross-section prediction of “cohort attachment,” a tendency for members of an agent’s hiring cohort to be disproportionately represented in his network. When members of a network formed within a firm are subsequently split across many firms, the desire to renew their successful working relationships can lead to job referrals. Former co-workers who provide referrals will be drawn disproportionately from the referred workers’ hiring cohorts at their previous employers.
    JEL: D85 J63 J64
    Date: 2019–10
  5. By: Gadenne, Lucie; Nandi, Tushar; Rathelot, Roland
    Abstract: Do tax systems distort firm-to-firm trade? This paper considers the effect of tax policy on supplier networks in a large developing economy, the state of West Bengal in India. Using administrative panel data on firms, including transaction data for 4.8 million supplier-client pairs, we first document substantial segmentation of supply chains between firms paying Value-Added Taxes (VAT) and non-VAT-paying firms. We then develop a model of firms' sourcing and tax decisions within supply chains to understand the mechanisms through which tax policy interacts with supply networks. The model predicts partial segmentation in equilibrium because of both supply-chain distortions (taxes affect how much firms trade with each other) and strategic complementarities in firms' decision to pay VAT. Finally, we test the model's predictions using variations over time within firm and within supplier-client pairs. We find that the tax system distorts firms' sourcing decisions, and evidence of strategic complementarities in firms' tax choices within supplier networks. These two mechanisms explain a substantial share of the supply chain segmentation that we observe.
    Date: 2019–08
  6. By: Grund, Christian (RWTH Aachen University); Sliwka, Dirk (University of Cologne); Titz, Krystina (RWTH Aachen University)
    Abstract: Drawing on two large German representative data sets, we analyze the role of works councils for the use of performance appraisals (PA). We distinguish between the incidence of performance appraisal systems as intended by the firm and their actual implementation on the level of the individual employee. We find that works councils tend to promote rather than restrict PA. Employees working in establishments with a works council are more likely to face a formal performance appraisal procedure. Works councils also act as a transmission institution for the actual use of an existing PA system – i.e. among the firms that claim to implement performance appraisals for all their employees, the likelihood of their employees actually having regular appraisals is substantially larger when works councils are in place. Moreover, the existence of works councils is positively related particularly to PA systems, which affects bonus payments.
    Keywords: performance appraisals, voice, works councils, performance pay
    JEL: M54 M12 J53 J83
    Date: 2019–10
  7. By: Hussinger, Katrin; Issah, Abdul-Basit
    Abstract: This study elucidates the mixed gamble confronting family firms when considering a related firm acquisition. The socioemotional and financial wealth trade-off associated with related firm acquisitions as well as their long-term horizon turns family firms more likely to undertake a related acquisition than non-family firms, especially when they are performing above their aspiration level. Post-merger performance pattern confirm that family firms are able to create long-term value through these acquisitions and by doing so they surpass non-family firms. These findings stand in contrast to commonly used behavioural agency predictions, but can be reconciled with theory through a mixed gambles' lens.
    Keywords: firm acquisitions,related firm acquisitions,mixed gamble,aspiration level,socioemotional wealth,value creation
    JEL: G34 L10 L20 M20
    Date: 2019
  8. By: Luca Bellardini (University of Rome Tor Vergata); Pierluigi Murro (LUISS University); Daniele Previtali (University of Naples Parthenope)
    Abstract: Attributing ratings to the top-20 owners, we construct a Risk-Weighted Ownership index (RWO) to measure the profitability and risk-taking behaviour of the ownership structure at banks. Collecting data from 19 European countries plus the UK over the 2008-2017 period, preliminary results show strong evidence that RWO measures are significant in explaining bank performance and risk, at both an accounting and a market-based level. Overall, these results suggest that not only markets and regulators should look at bank’s owners: instead, it is far more relevant to assess the contribution carried by top-owners to bank risk, both individually and collectively.
    Keywords: bank, ownership, risk, corporate governance
    JEL: G21 G32
    Date: 2019–04
  9. By: Vincenzo Atella (CEIS & DEF University of Rome "Tor Vergata"); Francesco Decarolis (Bocconi University, Economics Department)
    Abstract: The public procurement of medical devices is increasingly relying on auction mechanisms to move toward more transparent procedures and to promote competition between suppliers in a market where the quality of the products matters enormously and an improper auction design could be very harmful. Based on Italian hospital data, we present new evidence on the performance of the public tenders to procure orthopaedic prosthesis for hips, knees and shoulders. Focusing on three main outcomes, the number of participants, the presence of a single firm bidding and the winning rebate, for the first time we describe how features related to the tender, hospital, region and bidders' competition all contribute to explain the functioning of the procurement auctions. The evidence we obtain can meaningfully help policy makers in designing and implementing better public procurement systems.
    Keywords: procurement auctions, medical devices, orthopaedic prosthesis, tender characteristics, Italy.
    JEL: I18 J18 C21
    Date: 2019–10–10
  10. By: Ibrahim Ethem Guney; Abdullah Kazdal; Doruk Kucuksarac; Muhammed Hasan Yilmaz
    Abstract: [EN] This study attempts to quantify the effect of exchange rate on the value of non-financial firms listed on Borsa Istanbul. In the first part of the analysis, the regression results using firm-level data show that currency fluctuations tend to influence the stock returns of 44 firms out of 177 firms in the sample in a significant way with negative average foreign exchange (FX) sensitivity coefficient. The sectoral-level analysis indicates that sectors with net FX short position are also subject to higher FX sensitivity with respect to firm value. In the second part, firm-level determinants of FX sensitivity are investigated using quantile regression method. The estimation results indicate that the market value of firms with net FX position surplus tends to respond positively to the depreciation of Turkish lira against the United States (US) dollar across all quantiles. This finding stresses the importance of risk management activities for non-financial firms in terms of shielding themselves from FX risk. It is also observed that the degree of internationalization, firm size, profitability and growth opportunities are significant determinants of stock market pricing of FX risk. [TR] Bu calisma Borsa Istanbul'da islem goren finansal olmayan firmalarda doviz kurunun firma degeri uzerindeki etkisini olcmeyi amaclamaktadir. Analizin ilk asamasinda firma duzeyinde veri kullanilarak yapilan regresyon sonuclari kurdaki dalgalanmalarin orneklemi olusturan 177 firmadan 44'unun hisse senedi getirisini onemli duzeyde etkiledigini ve ortalama hassasiyet katsayisinin negatif oldugunu gostermektedir. Sektorel duzeyde gerceklestirilen analizler, yabanci para (YP) acik pozisyonunun yuksek oldugu sektorlerde firma degerinin kura hassasiyetinin daha yuksek olduguna isaret etmektedir. Ikinci asamada firma duzeyindeki kur hassasiyeti belirleyicileri kantil regresyon yontemiyle incelenmektedir. Tahmin sonuclari net YP pozisyon fazlasi tasiyan firmalarin piyasa degerinin Turk lirasindaki deger kayiplarina pozitif tepki verdigini ortaya koymaktadir. Bu bulgu, finansal olmayan firmalar icin risk yonetimi faaliyetlerinin olumsuz doviz kuru hareketlerinden korunma acisindan onemini gostermektedir. Ayrica, uluslararasilasma derecesi, firma buyuklugu, karlilik ve buyume potansiyellerinin hisse senedi piyasasinda kur riski fiyatlamasinin onemli belirleyicileri oldugu gozlenmektedir.
    Date: 2019

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