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on Business Economics |
| By: | Ian Dew-Becker; Stefano Giglio |
| Abstract: | This paper presents a novel and unique measure of cross-sectional uncertainty constructed from stock options on individual firms. Cross-sectional uncertainty varied little between 1980 and 1995, and subsequently had three distinct peaks -- during the tech boom, the financial crisis, and the coronavirus epidemic. Cross-sectional uncertainty has had a mixed relationship with overall economic activity, and aggregate uncertainty is much more powerful for forecasting aggregate growth. The data and moments can be used to calibrate and test structural models of the effects of uncertainty shocks. In international data, we find similar dynamics and a strong common factor in cross-sectional uncertainty. The data is available on our websites. A companion paper [Dew-Becker and Giglio, "Real-time forward-looking skewness over the business cycle"] finds firm-level skewness is significantly procyclical. |
| JEL: | C58 D81 D84 E22 E30 E32 E37 G13 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27864&r=all |
| By: | Li, Xiaogang |
| Abstract: | This dissertation presents the theoretic and empirical findings on innovation, market returns, and trade, with particular focuses on how a firm's innovation activities affect their market returns through the channel of productivity-improving, and how policy uncertainty affects a firm's trading and innovation decisions.Chapter 2 examines the relationship between productivity and innovation, using the U.S. manufacturers' patent data from 1976-2006. First, this chapter investigates whether productive firms actively participate in innovation in terms of having more patents, and then examines whether their innovation activities are involved in a wide spectrum of technological categories. The empirical results reveal that: (i) productivity is positively correlated with the number of patents granted and the number of technological categories for these patents; and (ii) productivity is positively correlated with the number of citations per granted patent and is also positively correlated with the number of technological categories for cited patents per granted patent.Chapter 3 examines the impact of innovation on a firm's operating performance, market valuation, and stock returns, especially the role of Innovation Efficiency in predicting a firm's future market valuation. Three different measures of Innovation Efficiency--the number of granted patents per patent or citation (backward and forward) technological fields scaled by research and development expenditures--are proposed, which combine the breadth of knowledge used to innovate and R\&D investments. The empirical results show that: (i) firm's market valuation and excess returns increases are largely driven by the changing valuation of Innovation Efficiency, while innovation quantity, measured by patent intensity and R\&D intensity, has a strong and significant negative effect; (ii) the positive effect of Innovation Efficiency became larger over time from 1950 to 2010 and for high-technology industries; (iii) high efficient innovation firms are able to achieve higher and more persistent profitability and better operating performance through the effect of productivity.Chapter 4 introduces a dynamic general equilibrium growth model with policy uncertainty where policy uncertainty endogenously affects the dynamics of technical change, market leadership, firm entry and exit selection, and trade flows, in a world with two large open economies at different stages of development. The theoretical investigation illustrates that increase in policy uncertainty has a significant negative effect on exports and imports, but has ambiguous effects on innovation and welfare, while dynamically, trade liberalization boosts domestic innovation through induced international competition. In the empirical portion, this chapter studies how policy uncertainty affects innovation and firm decisions to enter into and exit from export markets by estimating the impact of trade policy uncertainty on patents applied by Chines manufacturing firms, as well as firm's entry and exit. Using Chinese patent applications and Chinese customs transactions between 2000-2006, this chapter exploits time-variation in product-level trade policy and the empirical results show that: (i) Chinese firms have less incentive in innovation activities when facing increased trade policy uncertainty; (ii) Chinese firms are less likely to enter new foreign markets when their products are subject to increased trade policy uncertainty; (iii) Chinese firms are more likely to exit from established foreign markets when policy uncertainty increases. |
| Date: | 2020–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genstf:202001010800009179&r=all |
| By: | Fariha Kamal; Wei Ouyang |
| Abstract: | This paper describes the construction of the Longitudinal Firm Trade Transactions Database (LFTTD) enabling the identification of merchandise traders - exporters and importers - in the U.S. Census Bureau’s Business Register (BR). The LFTTD links merchandise export and import transactions from customs declaration forms to the BR beginning in 1992 through the present. We employ a combination of deterministic and probabilistic matching algorithms to assign a unique firm identifier in the BR to a merchandise export or import transaction record. On average, we match 89 percent of export and import values to a firm identifier. In 1992, we match 79 (88) percent of export (import) value; in 2017, we match 92 (96) percent of export (import) value. Trade transactions in year t are matched to years between 1976 and t+1 of the BR. On average, 94 percent of the trade value matches to a firm in year t of the BR. The LFTTD provides the most comprehensive identification of and the foundation for the analysis of goods trading firms in the U.S. economy. |
| Keywords: | trade transactions, matching, machine learning |
| JEL: | F00 F10 F14 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:20-28&r=all |
| By: | Breithaupt, Patrick; Kesler, Reinhold; Niebel, Thomas; Rammer, Christian |
| Abstract: | Knowledge-based capital is a key factor for productivity growth. Over the past 15 years, it has been increasingly recognised that knowledge-based capital comprises much more than technological knowledge and that these other components are essential for understanding productivity developments and competitiveness of both firms and economies. We develop selected indicators for knowledge-based capital, often denoted as intangible capital, on the basis of publicly available data from online platforms. These indicators based on data from Facebook and the employer branding and review platform Kununu are compared by OLS regressions with firm-level survey data from the Mannheim Innovation Panel (MIP). All regressions show a positive and significant relationship between survey-based firm-level expenditures for marketing and on-the-job training and the respective information stemming from the online platforms. We therefore explore the possibility of predicting brand equity and firm-specific human capital with machine learning methods. |
| Keywords: | Web Scraping,Knowledge-Based Capital,Intangibles |
| JEL: | C81 E22 O30 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20046&r=all |
| By: | Santiago Caicedo; Miguel Espinosa; Arthur Seibold |
| Abstract: | We study firm responses to a large-scale change in apprenticeship regulation in Colombia. The reform requires firms to train, setting apprentice quotas that vary discontinuously in firm size. We document strong heterogeneity in responses across sectors, where firms in sectors with high skill requirements tend to avoid training apprentices, while firms in low-skill sectors seek apprentices. Guided by these reduced-form findings, we structurally estimate firms’ training costs. Especially in high-skill sectors, many firms face large training costs, limiting their willingness to train apprentices. Yet, we find substantial overall benefits of expanding apprenticeship training, in particular when the supply of trained workers increases in general equilibrium. Finally, we show that counterfactual policies that take into account heterogeneity across sectors can deliver similar benefits from training while inducing less distortions in the firm size distribution and in the allocation of resources across sectors. |
| JEL: | E24 J21 J24 M5 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1204&r=all |
| By: | Dewitte, Ruben |
| Abstract: | This paper emphasizes the importance of two sufficient statistics to characterize firm-level heterogeneity in the workhorse heterogeneous firms trade model: the Cumulative Distribution Function (CDF) and the mean of firm-level sales. Contradicting the strong focus on the CDF, a close fit to average sales proves to be critical for model performance. Moreover, this average varies largely across finite sample draws due to sales being heavy-tailed, providing evidence that individual firms can influence the aggregate economy. As a result, modeled aggregate trade elasticities and Gains From Trade are unlikely to materialize: they are biased in finite samples and underlying characterizations of firm-level heterogeneity are rejected by the data. |
| Keywords: | Average productivity, firm size distribution, heavy-tailed Distributions, granularity, gains from trade |
| JEL: | F11 F12 L11 |
| Date: | 2020–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:103170&r=all |
| By: | Kyle Handley; J. Frank Li |
| Abstract: | We construct a new measure of firm-level uncertainty from analyzing the text of mandatory reports filed with the U.S. Securities and Exchange Commission. Using firm and establishment level panel data on investment margins and employment dynamics, we find our uncertainty measure has large effects on investment even after controlling for industry and time-varying shocks. Periods of high firm uncertainty (1) reduce investment rates by 0.5% and attenuate the response to positive sales shocks by about half and (2) reduce employment growth rates by 1.4% and the response to positive sales shocks by 30%. Firms are less responsive to demand shocks at the firm level and across establishments within the firm. Consistent with “wait and see” dynamics, uncertainty affects new investment activity, e.g. plant births and acquisition, more than disinvestment margins. |
| JEL: | D81 E22 E32 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27896&r=all |
| By: | Mara Faccio; John J. McConnell |
| Abstract: | Using newly-assembled data encompassing up to 75 countries and starting circa 1910, we find that the Schumpeterian process of creative destruction aptly describes the replacement of large firms by other firms, but exceptions to the norm of replacement are not rare and replacement is often not by new firms. Initial firm size and political connections represent the main obstacles to the Schumpeterian process while board interlocks and a corporate culture of innovation play modest roles. Consistent with a theory of political capture, when accompanied by regulations that restrict entry, political connections play a formidable role in abetting large firms remaining large. |
| JEL: | G3 G38 O16 P16 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27871&r=all |
| By: | Patrick Behr; Lars Norden; Raquel Oliveira |
| Abstract: | We investigate whether and how firms’ number of bank relationships affects labor market outcomes. We base our analysis on more than 5 million observations on matched credit and labor data from Brazilian firms during 2005-2014. We find that firms with more bank relationships employ significantly more workers and pay significantly higher wages. Moreover, increases (decreases) in the number of bank relationships result in positive (negative) effects on employment and wages. These results are robust for strictly exogenous changes in the number of bank relationships due to nationwide bank M&A activity, when using instrumental variable regressions, and are independent of firm size. The effects are due (but not limited) to higher credit availability, lower cost of credit and higher heterogeneity in firms’ bank relationships. Importantly, the firm-level results consistently translate into positive macroeconomic effects at the municipality and state levels. The evidence is novel and suggests positive effects of multiple bank relationships on labor market outcomes in an emerging economy. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:534&r=all |
| By: | Çağatay Bircan; Saka Orkun |
| Abstract: | We document a strong political cycle in bank credit and industry outcomes in Turkey. In line with theories of tactical redistribution, state-owned banks systematically adjust their lending around local elections compared with private banks in the same province based on electoral competition and political alignment of incumbent mayors. This effect only exists in corporate lending as opposed to consumer loans. It creates credit constraints for firms in opposition areas, which suffer drops in employment and sales but not firm entry. There is substantial misallocation of financial resources as provinces and industries with high initial efficiency suffer the greatest constraints. |
| Keywords: | Bank credit; Electoral cycle; State-owned banks; Credit misallocation |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:eiq:eileqs:139&r=all |
| By: | Artz, Georgeanne M.; Kim, Younjun; Orazem, Peter F.; Han, Peter J. |
| Abstract: | Using data on a sample of small Iowa towns consistently collected over two decades, we investigate how agglomeration economies, social capital, human capital, local fiscal policy, and natural amenities affect new firm entry. We find that human capital and agglomeration are more conducive to new firm entry than are natural amenities, local fiscal policy, or social capital. The impact of local fiscal policy is too small to overcome the locational disadvantages from insufficient endowment of human capital and agglomeration. A rural development approach that encourages firm entry in rural towns with the largest endowments of human capital and market agglomeration would be more successful than trying to raise firm entry in every town. |
| Date: | 2020–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genstf:202001010800001765&r=all |
| By: | Biswajit Banerjee (Ashoka University); Jelena Ćirjaković (Bank of Slovenia) |
| Abstract: | This paper examines the impact of the global financial crisis on firm exit and corporate deleveraging in Slovenia during 2008‒2014 using firm-level data. Firms are classified according to whether they increased their leverage, decreased their leverage or ceased operation during the specified time interval, and the likelihood of being in these three states are estimated. Deleveraging likelihood is analysed separately for total debt, business-to-business debt, bank debt, and non-bank financial debt. This empirical exercise shows that the influence of covariates on firm exit was different from that on deleveraging, and the impact on deleveraging differed between different types of debt. |
| Keywords: | Firm indebtedness; Firm deleveraging; Firm exit; Financial crisis; Slovenia |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:ash:wpaper:41&r=all |