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on Business Economics |
| By: | Dovern, Jonas; Müller, Lena Sophia; Wohlrabe, Klaus |
| Abstract: | Expectations are highly relevant for macroeconomic dynamics. Yet, the empirical evidence about properties of corporate macroeconomic expectations is scarce. Using new survey data on quantitative growth expectations of firms in Germany, we show that expectations are highly dispersed. The degree of dispersion depends on firm size and on how important the general economy is for the business of firms, supporting theories of rational inattention. Firms seem to extrapolate from local economic conditions and business experiences to aggregate growth expectations. Differences in growth expectations are associated with di erences in firms' Investment and labor demand. |
| Keywords: | GDP expectations,expectation heterogeneity,firm,ifo business tendency survey |
| JEL: | D84 E32 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:pp1859:15&r=all |
| By: | Cortes, Matias (York University, Canada); Tschopp, Jeanne (University of Bern) |
| Abstract: | Wage inequality has risen in many countries over recent decades. At the same time, production has become increasingly concentrated in a small number of firms. In this paper, we show that these two phenomena are linked. Theoretically, we show that shocks that increase concentration will also lead to an increase in wage dispersion between firms. Empirically, we use industry-level data from 14 European countries over the period 1999-2016 and show robust evidence of a positive and statis-tically significant correlation between concentration and between-firm wage inequality, driven by increases in market shares and wages in high productivity firms. |
| Keywords: | wage inequality, market power, heterogeneous firms, Europe |
| JEL: | J31 L11 E24 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13557&r=all |
| By: | Hassan Benchekroun; Miao Dai; Ngo Van Long |
| Abstract: | We examine the profitability of cross-ownership in an oligopolistic industry where firms compete as Cournot rivals. We consider a symmetric cross-ownership structure in which a subset of k firms engage in cross-shareholding and each firm has an equal silent financial interest in the other firms, while the remaining (n – k) firms stay independent. We show that a symmetric cross-ownership is never profitable for any levels of non-controlling minority shareholdings if the participation ratio (k/n) is less than or equal to (n+1)/(2n), while there exists a large range of cross-ownership for which it can be profitable beyond that participation ratio. This result may be called a cross-ownership paradox, analogous to the merger paradox. With the presence of stock constraints, however, we find some of the results from the cross-ownership paradox do not carry over to the case of non-renewable resource industries. The profitability of a symmetric cross-ownership can be positive even when the participation ratio (k/n) is less than or equal to (n+1)/(2n) and is always positive when the participation ratio (k/n) is greater than (n+1)/(2n), provided that the initial resource stock owned by each firm is small enough. We also highlight that cross-ownership can be preferable to a horizontal merger under Cournot competition. Not only is it more profitable to do so, more importantly, it constitutes a shrewd strategy to avoid possible legal challenges. |
| Keywords: | cross-ownership, profitability, oligopoly, shareholding, non-renewable resources, resource stock, horizontal merger, competition policy, antitrust |
| JEL: | L13 L41 Q30 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8503&r=all |
| By: | Cheng Chen; Chang Sun; Hongyong Zhang |
| Abstract: | We propose that multinational firms learn about their profitability in a particular market by observing their performance in nearby markets. We first develop a model of firm expectations formation with noisy signals from multiple markets and derive predictions on expectations formation and market entries. Using a dataset of Japanese multinational corporations that includes sales expectations of each affiliate, we provide evidence supporting the model’s predictions. We find that a positive signal about demand inferred from nearby markets raises the probability of entry into a new market, or raises the firm’s sales expectation in an existing (focal) market. The latter effect is stronger when (1) the firm is less experienced in the focal market (2) the signals from the focal market are noisier and (3) the firm is more experienced in markets where signals are extracted. |
| Keywords: | multinational production, learning, expectations formation, information transmission |
| JEL: | F10 F20 D83 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8477&r=all |
| By: | Abu Amin; Blake Bowler; Mostafa Monzur Hasan; Gerald L. Lobo; Jiri Tresl |
| Abstract: | This paper examines the relation between the corporate life cycle and lending spreads. Using a sample of 20,307 firm-loan observations spanning 5,076 publicly traded U.S. firms, we find that lending spreads follow a U-shape pattern across the life cycle phases. This pattern is in addition to the variation explained by typical controls. In a multivariate analysis, we find that firms in the introduction and decline phases pay lending spreads that are greater than firms in the mature phase (differences of 6 percent and 12 percent, respectively). We explore omitted variables bias and instrumental variable estimation in robustness testing and find that the Ushape pattern persists. Our findings are consistent with theoretical predictions regarding the relationship between the corporate life cycle and various lending risks. |
| Keywords: | firm life cycle; cost of debt; bank loans; risk; |
| JEL: | G32 M21 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp665&r=all |
| By: | Puggioni Daniela |
| Abstract: | This paper applies a structural framework to estimate production function coefficients, obtain firm-level markup estimates, and evaluate the impact of the trade liberalization that took place in Mexico in the period 1984-1990 on the profitability of the firms operating in the domestic market and exporters. Quantitatively, the results show no evidence of substantial productivity growth, but some evidence of trade discipline on the price-cost margins. A markup premium is however identified for intensive exporters. Qualitatively, these results suggest that the effectiveness of trade policies crucially depends on adequately implementing complementary reforms aimed at improving the competitiveness and the efficiency in the allocation of resources in the internal market. |
| Keywords: | Production function estimation;Productivity;Markups;Trade liberalization;Mexican manufacturing industries |
| JEL: | D22 D24 F14 L11 L60 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2019-14&r=all |
| By: | Daniel Baumgarten; Michael Irlacher; Karin Mayr-Dorn |
| Abstract: | High-performance firms typically have two features in common: i) they produce in more than one country and ii) they produce more than one product. In this paper, we analyze the internationalization strategies of multi-product firms at the product-level. We find that the most productive firms sell core varieties via foreign direct investment (FDI) and export products with intermediate productivity. Shocks to trade costs and technology affect the endogenous decision to export or produce abroad at the product-level and, in turn, the relative productivity between parents and affiliates. |
| Keywords: | multi-product firms, FDI, exports, flexible manufacturing |
| JEL: | F12 F23 L25 L11 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8471&r=all |
| By: | Breinlich, Holger; Nolen, Patrick; Wright, Greg C |
| Abstract: | In this paper we compare firms’ self-reported overseas sales, as reported in a commonly used UK financial reporting dataset, with their actual exports, as reportedby Her Majesty’s Revenue and Customs (HMRC). Finding that these flows are inseveral dimensions quite different, we then explore the implications of these differ-ences more formally. Since several studies within the international trade literature report findings based on the self-reported export values in financial datasets, wediscuss these findings in light of the departure of financial dataset-based exportsfrom “true” (HMRC) export values. |
| Date: | 2020–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:28657&r=all |