nep-bec New Economics Papers
on Business Economics
Issue of 2019‒12‒16
nine papers chosen by
Vasileios Bougioukos
Bangor University

  1. Ceo pay in perspective By Boyer, Marcel
  2. Bank Ownership and Margins of Trade By Pavel Chakraborty
  3. Work Flexibility and Firm Growth By A. Arrighetti; L. Cattani; F. Landini; A. Lasagni
  4. Export Decision under Risk By José de Sousa; Anne-Célia Disdier; Carl Gaigné
  5. Business Angel Investment, Public Innovation Funding and Firm Growth By Ali-Yrkkö, Jyrki; Pajarinen, Mika; Ylhäinen, Ilkka
  6. Pembangunan Purwarupa Sistem Evaluasi Performa Karyawan Berdasarkan Konsep Employee Relationship Management (ERM) Menggunakan Metode Fuzzy Classification By Handarkho, Yonathan Dri
  7. Does Stock Market Listing Impact Investment in Japan? By Joseph J. French; Ryosuke Fujitani; Yukihiro Yasuda
  8. Feminist Firms By Bennett, Benjamin; Erel, Isil; Stern, Lea; Wang, Zexi
  9. Endogenous Hours and the Wealth of Entrepreneurs By Wellschmied, Felix; Yurdagul, Emircan

  1. By: Boyer, Marcel
    Abstract: The CEO pay ratio, measured as the ratio of CEO pay over the median salary of a firm’s employees, is the most often quoted number in the popular press. This ratio has reached 281 this last year for S&P500 firms, the largest US firms by capitalization (as of November 21 2019). But the B-ratio I proposed here, measured as the CEO pay over the total payroll of the firm, relates CEO pay to the salary of each employee and may be the most relevant and informative figure on CEO pay as perceived by the firm’s employees themselves. How much a typical employee of the S&P500 firms implicitly “contributes” to the salary of his/her CEO? An amount of $273 on average or 0.5% of one’s salary, that is, one half of one percent on an individual salary basis. To assess whether such a contribution is worthwhile, one must determine the value of the CEO for the organization and its workers and stakeholders. The Appendix provides the data for all 500 firms regrouped in 10 industries (Bloomberg classification).
    Keywords: CEO pay ratio; B-ratio; S&P500; Bloomberg; Real options
    Date: 2019–12
  2. By: Pavel Chakraborty
    Abstract: Does a bank's ownership matter for a firm's performance (to which it is connected)? Especially, in the event of a crisis? I study this question through the effect of 2008-09 crisis to provide evidence on a new channel which matters significantly for a firm's export performance - bank ownership. In particular, I find: (a) firms connected to private and/or foreign banks earn around 7.7- 39% less in terms of their export earnings during the crisis as compared to firms' having banking relationships with public-sector banks. This happened as the public-sector banks were differentially treated by the Central Bank of India during the crisis due to a clause in the Indian Banking Act of 1969; (b) effect is concentrated only on the intensive margin of trade; (c) drop in exports is driven by firms' client to big domestic-private banks and banks of US origin; (d) firms not connected to public-sector banks also laid-o¤ workers (both managers and non-managers), employed less capital and imported less raw materials. In addition, I also find that firms with lower average product of capital (than the median) received about 50% more loans from the public-sector sources, suggesting a significant reinforcement of inefficiency in the Indian economy due to misallocation of credit.
    Keywords: Bank Ownership, 2008-09 Financial Crisis, Public-sector Banks, Private and/or Foreign Banks, Exports
    JEL: F14 F41 G21 G28
    Date: 2019
  3. By: A. Arrighetti; L. Cattani; F. Landini; A. Lasagni
    Abstract: In the last decades, work flexibility emerged as a key requirement firms must meet to face volatile markets and highly differentiated product demand. This paper compares two alternative approaches to strengthen work flexibility: internal flexibility, i.e. practices that focus on the employees’ ability to perform a variety of highly qualified tasks in a context of stable employment relationships; and external flexibility, i.e. practices that align employment and labour costs to demand fluctuations using a buffer of non-standard employees involved in routine tasks. We empirically verify whether both practices are able to boost sales growth using a linked employer-employee panel of manufacturing firms from the Emilia-Romagna region (Italy). While internal flexibility positively affects firm growth, external flexibility appears to hamper it. Such a negative effect, however, decreases when we limit the analysis to industries with high demand volatility and cost-based competition. The related managerial and policy implications are discussed.
    Keywords: internal flexibility; external flexibility; firm growth; industrial relations
    JEL: D22 L23 M51 M54 J41 J24
    Date: 2019
  4. By: José de Sousa (Université Paris-Saclay); Anne-Célia Disdier (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Carl Gaigné (INRA Rennes - INRA Rennes - INRA - Institut National de la Recherche Agronomique, University of Laval)
    Abstract: We show that economic uncertainty in foreign markets affects firms' economic decisions, particularly those of the most productive firms. Using export data at both the industry and firm levels, we uncover two empirical regularities. First, demand uncertainty in foreign markets affects export entry/exit decisions (extensive margin) and export sales (intensive margin). If all destination countries exhibited the lowest volatility observed across destinations, then total French exports would rise by approximately 18% (an increase primarily driven by the extensive margin). Second, the most productive exporters are more affected by a higher industry-wide expenditure volatility than are the least productive exporters. The 25% most productive firms export, on average, 27% more in value than the 25% least productive firms in less volatile markets, while this difference decreases to 12% in the most volatile markets.
    Keywords: firm exports,demand uncertainty,expenditure volatility,skewness
    Date: 2019–10
  5. By: Ali-Yrkkö, Jyrki; Pajarinen, Mika; Ylhäinen, Ilkka
    Abstract: Abstract In recent years, business angels have invested in a few hundred Finnish firms annually. The target firms are mainly young and small: 75% of them employ fewer than 10 workers and are less than 8 years old. These firms are most likely to be found in the ICT and professional service industries and manufacturing. Although many angel-funded firms have faster employment growth compared to matched nonfunded firms, the average growth rates do not significantly differ when we control for receiving public innovation funding and other firm characteristics. As many as 75% of the firms funded by business angels have also received public innovation funding in some phase, and 57% have received it before angel funding. However, no robust indication was found that combining these two sources of funds would give an extra boost to growth.
    Keywords: Business angels, Innovation subsidies, R&D, Firm growth
    JEL: D22 G24 G30 L53 O31
    Date: 2019–12–04
  6. By: Handarkho, Yonathan Dri
    Abstract: Keterangan: Artikel ini merupakan versi postprint. Artikel ini sudah dipublikasi pada: Seminar Nasional & Workshop Nasional Teknik Industri SEMNASTI – MUSINDEEP 2015 di Palembang, 27 - 29 Nopember 2015 Abstrak: Bagi perusahaan, performa dari karyawan adalah faktor yang turut serta memberikan kontribusi terhadap performa perusahaan. Melalui divisi human resources and development (HRD), penting bagi perusahaan untuk mengevaluasi kinerja karyawan dengan tujuan untuk menjaga kualitas dan performa karyawan perusahaan tersebut. Proses evaluasi kinerja dari karyawan akan semakin terbantu apabila tersedia sistem yang mampu secara otomatis membantu pihak HRD untuk melakukan hal tersebut. Berdasarkan permasalahan tersebut, penulis akan membangun sebuah purwarupa sistem pendukung keputusan yang diharapkan mampu mendukung proses evaluasi terhadap kinerja karyawan berdasarkan konsep Employee Relationship Management (ERM). ERM dapat didefinisikan sebagai pemanfaatan teknologi informasi pada area human resources dengan tujuan meningkatkan kinerja dan loyalitas karyawan yang akan memberikan dampak pada peningkatan performa perusahaan. Sistem yang dikembangkan pada penelitian ini berfokus kepada komponen dari ERM yaitu komponen Evaluation and Assessment. Performa karyawan akan dievaluasi berdasarkan dua aspek penilaian yang diambil dari area performance dan learning development. Pada penelitian ini, purwarupa sistem evaluasi akan dikembangkan menggunakan metode fuzzy classification. Metode ini memungkinkan perusahaan untuk bisa menggolongkan performa dari karyawan berdasarkan dua aspek penilaian yang bisa diambil dari area performance dan learning development.
    Date: 2018–01–09
  7. By: Joseph J. French; Ryosuke Fujitani; Yukihiro Yasuda
    Abstract: We provide the first large sample comparison of investment by Japanese listed and unlisted public firms. We show that listed firms invest more and have greater sensitivity to investment opportunities than comparable unlisted companies. Our findings suggest that the role of listing in alleviating financial constraints is more important than potential underinvestment due to myopic behavior. However, the positive relationship between listing and investment is primarily driven by standalone firms. Further analysis confirms that as the number of subsidiaries in a business group increases the positive impact of listing on investment declines. Additionally, when a firm faces financial constraints listing more positively impacts investment. We also document a positive association between stock liquidity and investment for listed firms. Taken together, our results suggest that stock markets play an important role in easing financial constraints and preventing managerial shirking both of which increase investment. Finally, we show that higher levels of owner-ship by financial institutions, board members, and foreign investors increases corporate investment.
    JEL: F3 G20 G31 G39
    Date: 2019–11
  8. By: Bennett, Benjamin (Tulane University - A.B. Freeman School of Business); Erel, Isil (Ohio State University (OSU) - Department of Finance); Stern, Lea (University of Washington - Michael G. Foster School of Business); Wang, Zexi (Lancaster University)
    Abstract: We examine whether reducing frictions in the labor market affects the performance of private and public firms. Using the staggered adoption of state-level Paid Family Leave acts, we provide causal evidence on the value created by relieving frictions to female talent allocation. The magnitude of firms' improved performance is correlated with their exposure to the laws. We document that reduced turnover, increased productivity, and female leadership are important mechanisms leading to the observed performance gains.
    JEL: J16 J22 J24 J32 J78 M14 M51
    Date: 2019–11
  9. By: Wellschmied, Felix (Universidad Carlos III de Madrid); Yurdagul, Emircan (Universidad Carlos III de Madrid)
    Abstract: US entrepreneurs typically work long hours in their firms and these hours form a large part of the firms' labor input. This paper studies the role of endogenous owner hours in shaping the wealth distribution among entrepreneurs. We introduce owners' endogenous labor supply into a model of entrepreneurial choice and financial frictions. The model fits well the levels and the dispersion of wealth among entrepreneurs. Long owner hours incentivize poor, highly productive individuals to be owners and help the most productive owners to accumulate large quantities of wealth. On net, owners working long hours decreases the median owner wealth and increase wealth dispersion among owners. Differently, the ability to work sufficiently short hours incentivizes owners to run low productivity firms with high wealth to income ratios. Finally, alternative calibrations ignoring the endogenous labor supply of owners lead to owners that are much richer than in the data and overstate the effect of financial frictions in the economy.
    Keywords: entrepreneurship, wealth accumulation, labor supply, firm dynamics
    JEL: E23 J22 J23 L26
    Date: 2019–11

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