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on Business Economics |
| By: | Pedro Bento; Diego Restuccia |
| Abstract: | The well-documented decline in business dynamism, measured in the literature by the net entry rate of employer firms, has been proposed as an explanation for the productivity growth slowdown in the United States. We assess the role of nonemployers, firms without paid employees, in business dynamism and aggregate productivity. Including nonemployers, the total number of firms has instead increased since the early 1980s, which in the context of a standard model of firm dynamics implies an average annual growth of aggregate productivity of 0.26%, one-quarter of the productivity growth in the data. Accounting for changes in the share of nonemployers and the firm size distribution over time, the increase in the total number of businesses implies an even higher productivity growth of 0.52% annually. The productivity growth slowdown is not due to changes in business dynamism. |
| Keywords: | nonemployers, employer firms, business dynamism, productivity, TFP. |
| JEL: | O4 O51 E1 |
| Date: | 2021–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-686&r=all |
| By: | Wolfgang Keller; Teresa Molina; William W. Olney |
| Abstract: | This paper examines gender differences among top business executives using a large executive-employer matched data set spanning the last quarter century. Female executives make up 6.2% of the sample and we find they exhibit more labor market churning – both higher entry and higher exit rates. Unconditionally, women earn 26% less than men, which decreases to 7.9% once executive characteristics, firm characteristics, and in particular job title are accounted for. The paper explores the extent to which firm-level temporal flexibility and corporate culture can explain these gender differences. Although we find that women tend to select into firms with temporal flexibility and a female-friendly corporate culture, there is no evidence that this sorting drives the gender pay gap. However, we do find evidence that corporate culture affects pay gaps within firms: the within-firm gender pay gap disappears entirely at female-friendly firms. Overall, while both corporate culture and flexibility affect the female share of employment, only corporate culture influences the gender pay gap. |
| JEL: | G30 J33 M14 M52 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28216&r=all |
| By: | Chor, Davin; Manova, Kalina; Yu, Zhihong |
| Abstract: | Global value chains have fundamentally transformed international trade and development in recent decades. We use matched firm-level customs and manufacturing survey data, together with InputOutput tables for China, to examine how Chinese firms position themselves in global production lines and how this evolves with productivity and performance over the firm lifecycle. We document a sharp rise in the upstreamness of imports, stable positioning of exports, and rapid expansion in production stages conducted in China over the 1992-2014 period, both in the aggregate and within firms over time. Firms span more stages as they grow more productive, bigger and more experienced. This is accompanied by a rise in input purchases, value added in production, and fixed cost levels and shares. It is also associated with higher profits though not with changing profit margins. We rationalize these patterns with a stylized model of the firm lifecycle with complementarity between the scale of production and the scope of stages performed. |
| Keywords: | global value chains; production line position; upstreamness; firm heterogeneity; firm lifecycle; China |
| JEL: | F10 F23 L23 L24 L25 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108215&r=all |
| By: | Jakub Hajda (University of Lausanne); Boris Nikolov (University of Lausanne; Swiss Finance Institute; European Corporate Governance Institute (ECGI)) |
| Abstract: | How does product life cycle affect investment and financing? To answer this question, we structurally estimate a dynamic model where the firm chooses product portfolio characteristics that influence cash flow dynamics and shape corporate policies. In the model, the firm trades off higher profitability of newer products versus product introduction costs. Using disaggregated product-level data, we find that the product dimension is critical in quantitatively explaining cash flow dynamics, investment and financing, and has materially important valuation effects. In particular, we show that product introductions and capital investment act as complements and that product dynamics induce stronger precautionary savings motives. Our estimates reveal that the product life cycle effect is more pronounced for firms with smaller product portfolios, supplying less unique products, and competing more intensely. |
| Keywords: | Product market strategy, product life cycle, investment, capital structure, structural estimation |
| JEL: | G31 G32 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2102&r=all |
| By: | Iwasaki, Ichiro; Kočenda, Evžen; Shida, Yoshisada |
| Abstract: | In this paper, we traced the survival status of 94,401 small businesses in 17 European emerging markets from 2007–2017 and empirically examined the determinants of their survival, focusing on institutional quality and financial development. We found that institutional quality and the level of financial development impact the survival probability of the researched SMEs in statistically significant and economically meaningful ways. The evidence holds even when we control for a set of firm-level characteristics such as ownership structure, financial performance, firm size, and age. The findings are also uniform across industries and country groups and robust beyond the difference in assumption of hazard distribution, firm size, region, and time period. |
| Keywords: | small business, institutions, financial development, survival analysis, European emerging markets |
| JEL: | C14 D02 D22 G33 M21 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2020-10&r=all |
| By: | Pauline Affeldt; Tomaso Duso; Klaus Gugler; Joanna Piechucka |
| Abstract: | An increasing body of empirical evidence is documenting trends toward rising concentration, profits, and markups in many industries around the world since the 1980s. Two major criticisms of these studies is that concentration and market shares are poorly measured at the national industry level while firm level revenues are a poor indicator of product sales. We use a novel database that identifies over 20,000 product/geographic antitrust markets affected by over2,000 mergers scrutinized by the European Commission between 1995 and 2014. We show that concentration, as measured by the market-specific post-merger HHI, is larger than reported in the extant literature (at least) by a factor of ten. We also show that concentration has increased over time on average. Yet, there is a great deal of heterogeneity across geographic markets and within broader industries. In a regression analysis that exploits this within-industry variation, we show that barriers to entry are unambiguously positively related to concentration irrespective of time periods, sectors of activity, and geographical market dimension analyzed. Strict past merger enforcement negatively correlates with concentration. Yet, this effect is stronger in the earlier decade (1995-2004) than subsequently. Intangibility of investments consistently displays positive correlation with concentration only for EU wide and worldwide services markets. In contrast, the correlation is negative in national markets. This underscores the importance of the large heterogeneity present in concentration developments across markets. |
| Keywords: | Concentration, HHI, market definition, entry barriers, mergers, merger control, intangibles |
| JEL: | L24 L44 K21 O32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1930&r=all |
| By: | Anja Baum; Clay Hackney; Paulo Medas; Mouhamadou Sy |
| Abstract: | State-owned enterprises (SOEs) are present in key sectors of the economies around the world. While they can provide an important public service, there is widespread concern that their activities are negatively affected by corruption. However, there is limited cross-country analysis on the costs of corruption for SOEs. We present new evidence on how corruption affects the performance of SOEs using firm level data across a large number of countries. One striking result is that SOEs perform as well as private firms in core sectors when corruption is low. Taking advantage of a novel database reforms, we also show that SOE governance reforms can generate significant performance gains. |
| Keywords: | Corruption;Public enterprises;Electricity;Public expenditure review;Labor costs;WP,operating profit,governance reform,current ratio,private firm,solid windowtext |
| Date: | 2019–11–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/253&r=all |
| By: | Surender Kumar (Centre for Development Economics, Delhi School of Economics); Pritika Dua (Department of Business Economics,University of Delhi,South Campus) |
| Abstract: | Large enterprises have been at forefront of environmental management with active participation in industry wide programs and adoption of ‘beyond compliance’ approach with more resources at their disposal. The present study revisits the premise of environmental-financial linkage in the Indian context with focus on large listed enterprises. We develop a comprehensive dataset of 459 large listed Indian companies covering major manufacturing and service sectors of the economy over a eleven year period from 2008-09 to 2018-19. Static and dynamic regression models are used to gauge the impact of environmental management practices adoption on firm profitability (Return on Assets and Return on Equity) and market valuation (Tobin Q, Market to Book Value Ratio and Excess Valuation to sales ratio). Empirical results suggest a positive impact of environmental management on firm profitability and market valuation in context of large listed enterprises. These results are of interest to corporate and policy makers for recognizing the financial implications of corporate environmental management. Key Words: Environmental Management Practices, Dynamic panel data models, Firm Valuation, Firm Profitability, Large Enterprises, India |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cde:cdewps:314&r=all |
| By: | Sirio Aramonte; Matthew Carl |
| Abstract: | Following periods of intense technological innovation, R&D is a critical driver of technology diffusion, but it is subject to frictions that can lower it below the level firms would undertake otherwise. We study whether sentiment can counterbalance these frictions and thus strengthen the link between firm-level R&D and lagged aggregate innovation. We find a positive answer for low-tech firms, which represent the main conduit for technology diffusion. The effect is stronger in the presence of informational externalities, that is when the results of experimentation funded by a company are observable by competitors. In contrast to the literature on sentiment and capital expenditures, the effect is weaker for financially constrained firms. |
| Keywords: | investor sentiment, technological innovation, R&D |
| JEL: | G02 G31 O32 O33 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:916&r=all |
| By: | Eliana Carranza (World Bank); Robert Garlick (Duke University); Kate Orkin (University of Oxford); Neil Rankin (University of Stellenbosch) |
| Abstract: | We present field experimental evidence that limited information about workseekers’ skills distorts both firm and workseeker behavior. Assessing workseekers’ skills, giving workseekers their assessment results, and helping them to credibly share the results with firms increases workseekers’ employment and earnings. It also aligns their beliefs and search strategies more closely with their skills. Giving assessment results only to workseekers has similar effects on beliefs and search, but smaller effects on employment and earnings. Giving assessment results only to firms increases callbacks. These patterns are consistent with two-sided information frictions, a new finding that can inform design of information-provision mechanisms. |
| Keywords: | Job search, hiring, two-sided limited information, worker assessment, field experiment, employment, earnings |
| JEL: | J23 J24 J31 J41 O15 O17 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:20-328&r=all |
| By: | Ling Jin (Inha University) |
| Abstract: | This paper examines how monetary policy affected the borrowing cost of listed firms in Korea before and after the Global Financial Crisis (GFC). I find that the effects of credit channel of monetary transmission are different by the assets size and debt-equity ratio levels of firms. Also, I find that the relationship between monetary policy and the borrowing spread of firms has changed before and after the GFC. The relationship is only significantly positive after the GFC. A statistically significant positive value implies that credit channel works in Korea. As for firm asset size partition, the relationship is significantly positive only after the GFC. As for firm debt-to-equity ratio partition, the coefficient of monetary policy for the low debt-to-equity ratio firms is significant of before and after the GFC. In contrast, the coefficient for the high debt-to-equity ratio firms is significant only before the GFC. Also, the U.S monetary policy has a significant impact on domestic firm’s borrowing spreads after the GFC. These relationships work through international banking channels. |
| Keywords: | Monetary policy Transmission, Credit channel, Borrowing spread, Firm-level data, International banking |
| JEL: | E44 E51 E52 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:inh:wpaper:2021-1&r=all |
| By: | Andres, Christian; Bazhutov, Dmitry; Cumming, Douglas J.; Limbach, Peter |
| Abstract: | M&A rumors cause anxiety, distraction, and reduced employee morale due to the implicit threat of job loss. Using an international sample of rumors that do not result in public bids, we show that firm productivity temporarily declines after M&A rumors surface. This productivity dip is more pronounced for target firms and for firms in countries with less employment protection, collective bargaining, and long-term orientation. Stock returns mirror these results, suggesting that rumors destroy shareholder value. The evidence fosters our understanding of the implications of a common phenomenon in financial markets, i.e., rumors, and the dark side of the takeover threat. |
| Keywords: | Employee rights,Firm productivity,Human capital,M&A rumors,Shareholder value,Threat of job loss |
| JEL: | D24 G00 G34 J24 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:2102&r=all |
| By: | Dixon, Huw (Cardiff Business School); Grimme, Christian (Leibniz Institute for Economic Research at the University of Munich and CESifo) |
| Abstract: | We examine the relative importance of time and state dependence in the price-setting decisions of firms using a monthly panel of German firms over the period 1980–2017. We propose a re?ned version of time dependence by introducing di?erent hazard functions for price increases and decreases. We ?nd three sets of results. First, time dependence is much more important for price setting than what the previous literature has found. Second, price decreases can be well explained by time dependence alone. Price increases are best predicted by the interaction of time-dependent and ?rm-speci?c state factors. Third, time dependence for price increases and decreases look completely di?erent from each other. Our empirical results suggest that theoretical models should integrate both time and state dependence rather than developing the approaches separately. |
| Keywords: | Survey Data, Price Setting, Extensive Margin, State-Dependent Pricing, Time-Dependent Pricing |
| JEL: | E30 E31 E32 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2021/1&r=all |
| By: | Benzarti, Youssef; Harju, Jarkko |
| Abstract: | This paper uses quasi-experimental variation in payroll tax rates in Finland to investigate how firms use their input factors. We find that higher payroll tax rates lead to large employment responses and have no effects on employee-level earnings. As payroll taxes increase, firms substitute away from low-skilled, routine and manual workers. Higher firm-level payroll tax rates also slightly decrease the total output of firms. Our results imply that firm-level production and input factor choices are clearly affected by payroll taxes. |
| Keywords: | public economics, payroll taxes, firm behavior, incidence, employment, redistribution, investments, productivity, Sosiaaliturva, verotus ja tulonjako, H20, H22, H23, |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:138&r=all |
| By: | Amr Hosny |
| Abstract: | A recent World Bank enterprise survey identified access to finance as the top constraint to Doing Business in Nigeria. In this context, the objective of this paper is two-fold: (i) study firm characteristics associated with more access to finance and export diversification; and (ii) quantify the impact of these structural obstacles on firm performance. Results suggest that (i) larger and export-oriented firms are about 40 percentage points less likely to report access to finance as a business obstacle, while firms perceiving access to finance as a constraint are, on average, about 10-40 percentage points less likely to be export-oriented diversified firms; and (ii) better access to finance and export diversification can help firm employment —as much as 80 percent higher— and capacity utilization. Results are largely robust to different specifications and estimation methods. |
| Keywords: | Export diversification;Exports;Credit;Capacity utilization;Employment;WP,firm,firm performance,export |
| Date: | 2020–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/062&r=all |
| By: | Talis Putnins (Finance Discipline Group, University of Technology Sydney); Arnis Sauka (Stockholm School of Economics in Riga) |
| Abstract: | Research summary To better understand why entrepreneurial orientation (EO) is positively associated with company performance, we propose and test a reconceptualization of how the components of EO (risk-taking, innovativeness, proactiveness) combine in driving performance. Drawing on financial economics theory, our conceptualization highlights that all three components positively contribute to performance, but in different ways. Risk-taking has a direct positive relationship with performance, which can be understood through the risk–return tradeoff that is central in financial economics theory. The relationship between risk-taking and performance is conditional on the level of innovativeness and thus innovativeness contributes to performance through its effect on the type of risk-taking. Proactiveness contributes to performance through its positive effect on the level of risk-taking. Managerial summary This study analyzes three key drivers of company performance: risk-taking, innovativeness, and proactiveness. We show that constructive risk-taking is the central driver of company performance, mirroring the principle of risk and return in financial investment settings. Risk- taking that is associated with innovation has a particularly strong positive relationship with performance, consistent with innovation being a driver of growth and profitability. More proactive firms tend to take on more risk and thus also perform better than less proactive firms. |
| Keywords: | conceptualization; entrepreneurial orientation; innovativeness; performance; proactiveness; risk-taking |
| Date: | 2020–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:ppaper:2020-6&r=all |