nep-bec New Economics Papers
on Business Economics
Issue of 2021‒03‒01
fourteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. CEO behavior and firm performance By Bandiera, Oriana; Prat, Andrea; Hansen, Stephen; Sadun, Raffaella
  2. Discrimination, Manager, and Firm Performance: Evidence from "Aryanizations" in Nazi Germany By Kilian Huber; Volker Lindenthal; Fabian Waldinger
  3. Uganda: Jobs Strategy For Inclusive Growth By Merotto,Dino Leonardo
  4. COVID-19 Is a Persistent Reallocation Shock By Jose Maria Barrero; Nicholas Bloom; Steven J. Davis; Brent Meyer
  5. Monetary Policy, Firm Heterogeneity, and Product Variety By Masashige Hamano; Francesco Zanetti
  6. Public vs. Private Investments In Network Industries By Jean-Marc Zogheib; Marc Bourreau
  7. Quality of Management of Firms in Turkey By Del Carpio, Ximena; Taskin, Temel
  8. Endogenous product scope: Market interlacing and aggregate business cycle dynamics By Pavlov, Oscar; Weder, Mark
  9. Are Bigger Banks Better? Firm-Level Evidence from Germany By Kilian Huber
  10. Aggregate Implications of Firm Heterogeneity: A Nonparametric Analysis of Monopolistic Competition Trade Models By Rodrigo Adão; Costas Arkolakis; Sharat Ganapati
  11. Debt specialisation and diversification: International evidence By Gregory Duffee; Peter Hördahl
  12. Do Employees Benefit from Worker Representation on Corporate Boards? By David Arnold; Will Dobbie; Peter Hull
  13. The Leniency Rule Revisited: Experiments on Cartel Formation with Open Communication By Maximilian Andres; Lisa Bruttel; Jana Friedrichsen
  14. Market Effects of Loyalty and Cost Factors in a Price Discrimination Environment By Theja Tulabandhula; Aris Ouksel

  1. By: Bandiera, Oriana; Prat, Andrea; Hansen, Stephen; Sadun, Raffaella
    Abstract: We develop a new method to measure CEO behavior in large samples via a survey that collects high-frequency, high-dimensional diary data and a machine learning algorithm that estimates behavioral types. Applying this method to 1,114 CEOs in six countries reveals two types: “leaders,” who do multifunction, high-level meetings, and “managers,” who do individual meetings with core functions. Firms that hire leaders perform better, and it takes three years for a new CEO to make a difference. Structural estimates indicate that productivity differentials are due to mismatches rather than to leaders being better for all firms.
    JEL: J50
    Date: 2020–04–01
  2. By: Kilian Huber (University of Chicago - Booth School of Business); Volker Lindenthal (Ludwig Maximilian University of Munich); Fabian Waldinger (University of Warwick - Department of Economics)
    Abstract: Large-scale increases in discrimination can lead to dismissals of highly qualified managers. We investigate how expulsions of senior Jewish managers, due to rising discrimination in Nazi Germany, affected large corporations. Firms that lost Jewish managers experienced persistent reductions in stock prices, dividends, and returns on assets. Aggregate market value fell by roughly 1.8 percent of German GNP because of the expulsions. Managers who served as key connectors to other firms and managers who were highly educated were particularly important for firm performance. The findings imply that individual managers drive firm performance. Discrimination against qualified business leaders causes first-order economic losses.
    Date: 2020
  3. By: Merotto,Dino Leonardo
    Abstract: Trend growth in Uganda’s economy has not been fast enough to create enough jobs with higher earnings for one of the world’s fastest growing workforces. With almost three quarters of young people still joining the workforce on farms, Uganda’s economic transformation into off farm waged jobs in urban areas must be hastened for faster economic growth. This report identifies ten key facts from a Jobs Diagnostic analysis which describe the main jobs challenges Uganda faces. It then sets out policy recommendations for a strategy for jobs and economic transformation which focuses on creating more waged jobs in Uganda, encouraging mobility into better jobs in urban areas, accelerating transformation of Uganda’s agriculture, and fostering inclusion into better jobs.
    Keywords: Job Quality; information and communication technology; long-run effect; higher level of education; labor market outcome; social security contribution; job search assistance; gender earnings gap; Young Workers; job match; labor market issue; social security fund; labor market function; environment for woman; linear probability model; agriculture and industry; complete secondary education; terms of skills; skill and jobs; entire labor force; gender wage gap; labor market situation; written contract; skill need; earnings distribution; sales worker; informal firms; regulatory environment; firm size; job performance; marital status; industry sector; hourly earnings; young woman; education level; individual characteristic; older worker; professional skill; firm growth; job satisfaction; average earning; registration status; Higher Education; low wage; confidence interval; protective service; Technical Training; job placement; business skill; quantile regressions; managerial skill; low earnings; geographical location; data quality; education qualification; labor demand; job training; new job; gender specific; Women Empowerment; permanent job; gender dimension; Labor Law; teaching profession; social contribution; job characteristic; labor supply; firm performance; occupational category; earnings trend; occupational skill; driving force; survey questions; individual level; rural area; earnings regression; central regions; individual weight; earnings data; net earning; labor economics; age cohort; earnings measure; low education; micro firms; job offer; previous work; annual leave; education category; standard error; risk premium; informal worker; earnings gain; marginal effect; employee earnings; employee benefit
    Date: 2020–02–01
  4. By: Jose Maria Barrero (Instituto Tecnológico Autónomo de México - Business School); Nicholas Bloom (Stanford University - Department of Economics; NBER); Steven J. Davis (University of Chicago - Booth School of Business; Hoover Institution); Brent Meyer (Federal Reserve Bank of Atlanta)
    Abstract: Drawing on data from the firm-level Survey of Business Uncertainty, we present three pieces of evidence that COVID-19 is a persistent reallocation shock. First, rates of excess job and sales reallocation over 24-month periods have risen sharply since the pandemic struck, especially for sales. We compute these rates by aggregating over monthly firm-level observations that look back 12 months and ahead 12 months. Second, as of December 2020, firm-level forecasts of sales revenue growth over the next year imply a continuation of recent changes, not a reversal. Third, COVID-19 shifted relative employment growth trends in favor of industries with a high capacity of employees to work from home, and against those with a low capacity.
    Keywords: COVID-19, reallocation shock, business expectations, working from home, Survey of Business Uncertainty
    JEL: D22 D84 E23 E24 J21 J62 J63
    Date: 2020
  5. By: Masashige Hamano (Waseda University); Francesco Zanetti (University of Oxford)
    Abstract: This study provides new insights on the allocative effect of monetary policy. It shows that contractionary monetary policy exerts a non-trivial reallocation effect by cleansing unproductive firms and enhancing aggregate productivity. At the same time, however, reallocation involves a reduction in the number of product variety that is central to consumer preferences and hurts welfare. A contractionary policy prevents the entry of new firms and insulates existing firms from competition, reducing aggregate productivity. Under demand uncertainty, the gain of the optimal monetary policy diminishes in firm heterogeneity and increases in the preference for product variety. We provide empirical evidence on US data, which corroborates the relevance of monetary policy for product variety that results from firm entry and exit, and provides limited support to the cleansing effect of monetary policy.
    Keywords: Monetary policy; firm heterogeneity; product variety; reallocation
    JEL: E32 E52 L51 O47
    Date: 2020–06
  6. By: Jean-Marc Zogheib; Marc Bourreau
    Abstract: We study the competition between a private firm and public firms on prices andinvestment in new infrastructures. While the private firm maximizes its profits,public firms maximize the sum of their profits and consumer surplus, subject to abudget constraint. We consider two scenarios of public intervention, with a nationalpublic firm and with local public firms. In a monopoly benchmark, we find that thenational public firm has the highest coverage and charges a uniform price allowingcross-subsidies between high-cost and low-cost areas. Moreover, the private firmcovers as much as local public firms. In a mixed duopoly, a stronger competitivepressure drives firms' prices up while it drives down (up) the national public (private)firm's coverage.
    Keywords: public firms, investment, network industries, mixed duopoly.
    JEL: D43 H44 L20 L33
    Date: 2021
  7. By: Del Carpio, Ximena; Taskin, Temel
    Abstract: This paper examines the quality of management practices in Turkey and its relation to other firm-level characteristics such as firm performance, competition, and type of ownership. A key finding is that management quality is positively correlated with productivity and quality of jobs across subsectors of manufacturing. But the average score of management quality in Turkey is relatively low compared to peer countries. Factors such as firm size, level of human capital of the workforce, export intensity of the firm, openness to international markets, level of hierarchy in decision making, and degree of managerial autonomy are found to be important determinants of managerial practices in Turkey. Thus, improvements in these dimensions, through relevant policies and incentives, can have a positive effect on the quality of firm management going forward.Such improvements in management practices—particularly in the two dimensions whereTurkey scores lowest: monitoring and targeting—can have positive effects on firmperformance and lead to increases in the creation of quality jobs.
    Keywords: paper issue; management operation; per capita income level; human capital of worker; regional per capita income; higher level of education; lack of knowledge; human resource management; journal of finance; improvements in management; quality of job; impact of competition; flexible labor market; privileges and immunity; principal component analysis; product market competition; underdeveloped financial market; Rule of Law; intensity of competition; quality assurance process; types of firms
    Date: 2019–04–01
  8. By: Pavlov, Oscar (Tasmanian School of Business & Economics, University of Tasmania); Weder, Mark (Department of Economics and Business Economics, Aarhus University, Denmark)
    Abstract: This paper examines a market interlacing industry configuration in general equilibrium with multi-product firms. In contrast to previous studies which utilize market segmentation, firms produce multiple products even in the complete absence of the love of variety. Product scopes are procyclical and entry and exit of firms generates an endogenous amplification mechanism. When simulated by shocks derived from the efficiency and labor wedges, the model replicates the changes in dynamics between the pre- and post 1983 periods, and explains the hours-productivity puzzle.
    Keywords: multi-product firms, business cycles
    JEL: E32
    Date: 2021
  9. By: Kilian Huber (University of Chicago - Booth School of Business)
    Abstract: The effects of large banks on the real economy are theoretically ambiguous and politically controversial. I identify quasi-exogenous increases in bank size in postwar Germany. I show that firms did not grow faster after their relationship banks became bigger. In fact, opaque borrowers grew more slowly. The enlarged banks did not increase profits or efficiency, but worked with riskier borrowers. Bank managers benefited through higher salaries and media attention. The paper presents newly digitized microdata on German firms and their banks. Overall, the findings reveal that bigger banks do not always raise real growth and can actually harm some borrowers.
    JEL: E24 E44 G21 G28
    Date: 2020
  10. By: Rodrigo Adão (University of Chicago - Booth School of Business; NBER); Costas Arkolakis (Yale University - Department of Economics; NBER); Sharat Ganapati (Georgetown University - Department of Economics)
    Abstract: We measure the role of firm heterogeneity in counterfactual predictions of monopolistic competition trade models without parametric restrictions on the distribution of firm fundamentals. We show that two bilateral elasticity functions are sufficient to nonparametrically compute the counterfactual aggregate impact of trade shocks, and recover changes in economic fundamentals from observed data. These functions are identified from two semiparametric gravity equations governing the impact of bilateral trade costs on the extensive and intensive margins of firm-level exports. Applying our methodology, we estimate elasticity functions that imply an impact of trade costs on trade flows that falls when more firms serve a market because of smaller extensive margin responses. Compared to a baseline where elasticities are constant, firm heterogeneity amplifies both the gains from trade in countries with more exporter firms, and the welfare gains of European market integration in 2003-2012.
    Date: 2020
  11. By: Gregory Duffee; Peter Hördahl
    Abstract: We uncover a strong U-shape in bond financing by US firms. Firms with total debt in the range of $10 million to $100 million tend to use much less bond financing relative to loan financing than do firms with more or less total debt. There is no corresponding U-shape in less-developed Asian markets, while the advanced markets of Hong Kong SAR and Korea are in the middle. These patterns, and more generally the cross-firm variation in firms' use of bond financing relative to financing through loan facilities, are largely unrelated to either credit quality or monitoring effectiveness. This suggests that market segmentation is more likely. Finally, we find evidence of debt diversification by highly-leveraged firms.
    Keywords: corporate bonds, capital structure, firm financing, debt specialisation, debt diversification
    JEL: G30 G32
    Date: 2021–02
  12. By: David Arnold (University of California, San Diego - Department of Economics); Will Dobbie (Harvard University - Harvard Kennedy School; NBER); Peter Hull (University of Chicago - Department of Economics; NBER)
    Abstract: Do employees benefit from worker representation on corporate boards? Economists and policymakers are keenly interested in this question – especially lately, as worker representation is widely promoted as an important way to ensure the interests and views of the workers. To investigate this question, we apply a variety of research designs to administrative data from Norway. We find that a worker is paid more and faces less earnings risk if she gets a job in a firm with worker representation on the corporate board. However, these gains in wages and declines in earnings risk are not caused by worker representation per se. Instead, the wage premium and reduced earnings risk reflect that firms with worker representation are likely to be larger and unionized, and that larger and unionized firms tend to both pay a premium and provide better insurance to workers against fluctuations in firm performance. Conditional on the firm’s size and unionization rate, worker representation has little if any effect. Taken together, these findings suggest that while workers may indeed benefit from being employed in firms with worker representation, they would not benefit from legislation mandating worker representation on corporate boards.
    JEL: C26 J15 K42
    Date: 2020
  13. By: Maximilian Andres (University of Potsdam); Lisa Bruttel (University of Potsdam); Jana Friedrichsen (WZB, Humboldt-Universität zu Berlin, DIW Berlin)
    Abstract: The experimental literature on antitrust enforcement provides robust evidence that communication plays an important role for the formation and stability of cartels. We extend these studies through a design that distinguishes between innocuous communication and communication about a cartel, sanctioning only the latter. To this aim, we introduce a participant in the role of the competition authority, who is properly incentivized to judge communication content and price setting behavior of the firms. Using this novel design, we revisit the question whether a leniency rule successfully destabilizes cartels. In contrast to existing experimental studies, we find that a leniency rule does not affect cartelization. We discuss potential explanations for this contrasting result.
    Keywords: cartel, judgment of communication, corporate leniency program, price competition, experiment
    JEL: C92 D43 L41
    Date: 2021–02
  14. By: Theja Tulabandhula; Aris Ouksel
    Abstract: Product cost heterogeneity across firms and loyalty models of customers are two topics that have garnered limited attention in prior studies on competitive price discrimination. Costs are generally assumed negligible or equal for all firms, and loyalty is modeled as an additive bias in customer valuations. We extend these previous treatments by considering cost asymmetry and a richer class of loyalty models in a game-theoretic model involving two asymmetric firms. Here firms may incur different non-negligible product costs, and customers can have firm-specific loyalty levels. We characterize the effects of loyalty levels and product cost difference on market outcomes such as prices, market share and profits. Our analysis and numerical simulations shed new light on market equilibrium structures arising from the interplay between product cost difference and loyalty levels.
    Date: 2021–02

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