nep-bec New Economics Papers
on Business Economics
Issue of 2020‒01‒27
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Debunking the granular origins of aggregate fluctuations : from real business cycles back to Keynes By Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich
  2. Human Capital and Financial Development: Firm-Level Interactions and Macroeconomic Implications By Allub, Lian; Gomes, Pedro; Kuehn, Zoë
  3. All on Board? New Evidence on Board Gender Diversity from a Large Panel of Firms By Tyrowicz, Joanna; Terjesen, Siri; Mazurek, Jakub
  4. One swallow does not make a summer:Episodes and persistence in high-growth By Silviano Esteve-Pérez; Fabio Pieri; Diego Rodriguez
  6. The Cyclicality of CEO Turnover By Liebersohn, Carl; Packard, Heidi
  7. Changing the Paradigm of Stock Ownership from Concentrated Towards Dispersed Ownership? Evidence from Brazil and Consequences for Emerging Countries By Gorga, Érica; Library, Cornell
  8. Managerial Overconfidence and Self-Reported Success By Nikolaj Kirkeby Niebuhr
  9. Do employee spinoffs learn markets from their parents? Evidence from international trade By Muendler, Marc-Andreas; Rauch, James E
  10. Mining the Automotive Industry: A Network Analysis of Corporate Positioning and Technological Trends By Niklas Stoehr; Fabian Braesemann; Michael Frommelt; Shi Zhou
  11. On Globalization and the Concentration of Talent By Ulrich Schetter; Oriol Tejada
  12. Inputs, Incentives, and Self-Selection at the Workplace By Amodio, Francesco; Martinez-Carrasco, Miguel A.
  13. Estimation of Firm-Level Productivity in the Presence of Exports: Evidence from China's Manufacturing By Malikov, Emir; Zhao, Shunan; Kumbhakar, Subal C.

  1. By: Giovanni Dosi (Laboratory of Economics and Management); Mauro Napoletano (Observatoire français des conjonctures économiques); Andrea Roventini (Observatoire français des conjonctures économiques); Tania Treibich (Observatoire français des conjonctures économiques)
    Abstract: In this work we study the granular origins of business cycles and their possible underlying drivers. As shown by Gabaix (Econometrica 79:733–772, 2011), the skewed nature of firm size distributions implies that idiosyncratic (and independent) firm-level shocks may account for a significant portion of aggregate volatility. Yet, we question the original view grounded on “supply granularity”, as proxied by productivity growth shocks – in line with the Real Business Cycle framework–, and we provide empirical evidence of a “demand granularity”, based on investment growth shocks instead. The role of demand in explaining aggregate fluctuations is further corroborated by means of a macroeconomic Agent-Based Model of the “Schumpeter meeting Keynes” family Dosi et al. (J Econ Dyn Control 52:166–189, 2015). Indeed, the investigation of the possible microfoundation of RBC has led us to the identification of a sort of microfounded Keynesian multiplier.
    Keywords: Business cycles; Granular residual; Granularity hypothesis; Agent-based models; Firm dynamics ; Productivity growth; Investment growth
    JEL: C63 E12 E22 E32 O4
    Date: 2019–03
  2. By: Allub, Lian; Gomes, Pedro; Kuehn, Zoë
    Abstract: Capital-skill complementarity in production implies non-trivial interactions between availability of human capital and financial constraints. Firms that are constrained in their access to finance hire a lower proportion of skilled workers than unconstrained firms. On the other hand, higher wages of skilled workers reduce firms’ desired capital intensity and thus loosen their effective financial constraints. We build a dynamic occupational choice model to quantify how a lack of human capital and financial frictions, as well as the joint effect of both restrictions interact to explain cross-country differences in aggregate output per capita, productivity, average firm size and college premia. We calibrate our model to US data, and we vary financial frictions and educational attainment as observed across countries. We find that the joint effect of both restrictions is up to 50 percent larger compared to the sum of the individual effects. In countries with a negligible share of tertiary educated workers, financial development has small effects on aggregate output.
    Keywords: Banca de desarrollo, Educación, Evaluación de impacto, Finanzas,
    Date: 2019
  3. By: Tyrowicz, Joanna (University of Warsaw); Terjesen, Siri (Indiana University Bloomington); Mazurek, Jakub (GRAPE)
    Abstract: Using a unique database of over 20 million firms over two decades, we examine the industry sector and national institution drivers of the prevalence of women directors on supervisory and management boards in both public and private firms across 41 advanced and emerging European economies. We demonstrate that gender board diversity has generally increased, yet women remain rare in both boards of firms in Europe: approximately 70% have no women directors on their supervisory boards, and 60% have no women directors on management boards. We leverage institutional and resource dependency theoretical frameworks to demonstrate that few systematic factors are associated with greater gender diversity for both supervisory and management boards among both private and public firms: the same factor may exhibit a positive correlation to a management board, and a negative correlation to a supervisory board, or vice versa. We interpret these findings as evidence that country-level gender equality and cultural institutions exhibit differentiated correlations with the presence of women directors in management and supervisory boards. We also find little evidence that sector-level competition and innovativeness are systematically associated with the presence of women on either board in either group of firms.
    Keywords: female directors, glass ceiling, gender board diversity, institutional theory, resource dependency theory
    JEL: J7 P5
    Date: 2020–01
  4. By: Silviano Esteve-Pérez; Fabio Pieri; Diego Rodriguez
    Abstract: This paper analyzes the episodes (spells) of high-growth in firm size and tracks their length in a sample of Spanish manufacturing firms observed over about two decades. The use of duration models allows us (i) to take a year-on-year perspective in the analysis of episodes and persistence in high-growth, (ii) to study the determinants of the transitions to and from the high-growth state, and (iii) to check if these factors change their role across the business cycle.
    Date: 2020–01
  5. By: Niar, Hikma; Jamali, Hisnol
    Abstract: This study investigates the Determinants of profitability and firm values in the Manufacturing Sector of Firms in Indonesia. A total of 55 companies listed on the Indonesia Stock Exchange were used as samples. Observation data is used from 2014 to 2016. The Structural Equation Modeling Test using analysis of moment structures ver. 22 provides evidence that Investment decisions has a positive and significant effect on profitability but not for firm values. Capital structure has a positive and significant effect on profitability but not for firm values. Company's growth has a positive and significant effect on profitability and firm values and then the last causality is Profitability has a positive and significant effect on firm values
    Date: 2018–03–18
  6. By: Liebersohn, Carl (Ohio State U); Packard, Heidi (U of Michigan)
    Abstract: CEO turnover is highly pro-cyclical. This paper aims to explain why. We begin by showing that the cyclicality is driven almost entirely by executives of retirement age. We further provide evidence that executives time their retirement to maximize the value of their pensions. Since CEO pay is pro-cyclical and pensions are based on pay in the final years of tenure, executives have the incentive to retire when the economy is doing well. Cyclicality is particular strong in firms with strong corporate governance, which suggests that retirement cyclicality is a tool firms use to constrain CEO behavior.
    JEL: J26 M12 M51
    Date: 2019–12
  7. By: Gorga, Érica; Library, Cornell
    Abstract: 29 Northwestern Journal of International Law & Business, (2009) This paper analyzes micro-level dynamics of changes in ownership structures. It investigates a unique event: changes in ownership patterns currently taking place in Brazil. It builds upon empirical evidence to advance the theoretical understanding of how and why concentrated ownership structures can change towards dispersed ownership. Commentators argue that the Brazilian capital markets are finally taking off. The number of listed companies and Initial Public Offerings (IPOs) in the São Paulo Stock Exchange (Bovespa) has greatly increased. Firms are migrating to Bovespa's special listing segments, which require higher standards of corporate governance. Companies have sold control in the market, and the stock market has recently seen an attempted hostile takeover. This paper discusses these current developments and analyzes ownership structures of companies listed on Bovespa's listing segments based on data from 2006 and 2007. It provides the first evidence of the decline of ownership concentration in Brazilian corporations. There is, however, an important caveat: dispersed ownership is mainly found in Novo Mercado, the listing segment that requires the one-share-one-vote rule. This paper, then, investigates firms' migration patterns, and finds that eighty-five percent of Novo Mercado's firms are "new entrant" firms. Traditional firms have mostly migrated to Level 1, the least stringent corporate governance segment. Thus, there are two corporate worlds in Brazilian capital markets: new corporations that adopt proactive corporate governance patterns, and established corporations that retain their main patterns of corporate governance or ownership structure. This paper additionally explores the consequences of increased dispersion of ownership through private contracting, such as shareholders' agreements and bylaws. The evidence suggests an increasing reliance on shareholders' agreements to coordinate joint control and to bind directors' votes. Research also shows a growing adoption of anti-takeover devices in bylaws. Finally, this paper sheds light on the incentives that may alter preferences of controlling shareholders. This discussion also explains why controlling shareholders opt to create greater diversity of ownership structures. This analysis advances our knowledge of corporate structures in other emerging countries.
    Date: 2018–04–15
  8. By: Nikolaj Kirkeby Niebuhr (Department of Economics and Business Economics, Aarhus University)
    Abstract: I consider the optimal contract for an overconfident manager in a principal-agent model with moral hazard where the contract is written on the earnings of the firm. Overconfidence causes the manager to overestimate his ability to affect the outcome of the firm. Overconfidence first reduces cost of agency, and if the level of overconfidence is significant enough, it causes the manager to wager on his wrong beliefs. The accounting system obscures the outcome of the manager's effort, which attenuates the effect of significant overconfidence and decreases the principal's profit. Inducing the manager to truthfully communicate his self-observed success allows the principal to directly contract on the cause of disagreement, the manager's effect on firm outcome. This reduces the risk premium for a slightly overconfident manager and emphasizes the wager effect for a significantly overconfident manager. The value of communication is first decreasing in overconfidence for a slightly overconfident manager and then increasing in overconfidence for a significantly overconfident manager.
    Keywords: Overconfidence, Moral hazard, Communication, Disclosure
    JEL: D83 D86 D91 M41
    Date: 2020–01–10
  9. By: Muendler, Marc-Andreas; Rauch, James E
    Keywords: Employee spinoffs, Intrafirm learning, Export spillovers, Firm performance, Economics
    Date: 2018–06–01
  10. By: Niklas Stoehr; Fabian Braesemann; Michael Frommelt; Shi Zhou
    Abstract: The digital transformation is driving revolutionary innovations and new market entrants threaten established sectors of the economy such as the automotive industry. Following the need for monitoring shifting industries, we present a network-centred analysis of car manufacturer web pages. Solely exploiting publicly-available information, we construct large networks from web pages and hyperlinks. The network properties disclose the internal corporate positioning of the three largest automotive manufacturers, Toyota, Volkswagen and Hyundai with respect to innovative trends and their international outlook. We tag web pages concerned with topics like e-mobility and environment or autonomous driving, and investigate their relevance in the network. Sentiment analysis on individual web pages uncovers a relationship between page linking and use of positive language, particularly with respect to innovative trends. Web pages of the same country domain form clusters of different size in the network that reveal strong correlations with sales market orientation. Our approach maintains the web content's hierarchical structure imposed by the web page networks. It, thus, presents a method to reveal hierarchical structures of unstructured text content obtained from web scraping. It is highly transparent, reproducible and data driven, and could be used to gain complementary insights into innovative strategies of firms and competitive landscapes, which would not be detectable by the analysis of web content alone.
    Date: 2019–12
  11. By: Ulrich Schetter (Center for International Development at Harvard University); Oriol Tejada
    Abstract: We analyze how globalization affects the allocation of talent across competing teams in large matching markets. Assuming a reduced form of globalization as a convex transformation of payoffs, we show that for every economy where positive assortative matching is an equilibrium without globalization, it is also an equilibrium with globalization. Moreover, for some economies positive assortative matching is an equilibrium with globalization but not without. The result that globalization promotes the concentration of talent holds under very minimal restrictions on how individual skills translate into team skills and on how team skills translate into competition outcomes. Our analysis covers many interesting special cases, including simple extensions of Rosen (1981) and Melitz (2003) with competing teams.
    Keywords: competing teams, globalization, inequality, matching
    JEL: C78 D3 D4 F61 F66
    Date: 2019–12
  12. By: Amodio, Francesco (McGill University); Martinez-Carrasco, Miguel A. (Universidad de los Andes)
    Abstract: This paper studies how asymmetric information over inputs affects workers' response to incentives and self-selection at the workplace. Using daily records from a Peruvian egg production plant, we exploit a sudden change in the worker salary structure and find that workers' effort, firm profits, and worker participation change differentially along the two margins of input quality and worker type. Firm profits increase differentially from high productivity workers, but absenteeism and quits of these workers also differentially increase. Evidence shows that information asymmetries over inputs between workers and managers shape the response to incentives and self-selection at the workplace.
    Keywords: asymmetric information, input heterogeneity, incentives, self-selection
    JEL: D22 D24 J24 J33 M11 M52 M54 O12
    Date: 2019–12
  13. By: Malikov, Emir; Zhao, Shunan; Kumbhakar, Subal C.
    Abstract: Motivated by the longstanding interest of economists in understanding the nexus between firm productivity and export behavior, this paper develops a novel structural framework for control-function-based nonparametric identification of the gross production function and latent firm productivity in the presence of endogenous export opportunities that is robust to recent unidentification critiques of proxy estimators. We provide a workable identification strategy, whereby the firm's degree of export orientation provides the needed (excluded) relevant independent exogenous variation in endogenous freely varying inputs, thus allowing us to identify the production function. We estimate our fully nonparametric IV model using the Landweber-Fridman regularization with the unknown functions approximated via artificial neural network sieves with a sigmoid activation function which are known for their superior performance relative to other popular sieve approximators, including the polynomial series favored in the literature. Using our methodology, we obtain robust productivity estimates for manufacturing firms from twenty eight industries in China during the 1999-2006 period to take a close look at China's exporter productivity puzzle, whereby exporters are found to exhibit lower productivity levels than non-exports.
    Keywords: ANN sieves, control function, export, nonparametric, productivity, proxy, regularized estimation, TFP
    JEL: D22 D24 F10 L10 L60
    Date: 2020

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