nep-bec New Economics Papers
on Business Economics
Issue of 2021‒04‒05
thirteen papers chosen by
Vasileios Bougioukos
Bangor University

  1. Board Characteristics and Firm’s Financial Performance in Nigeria By Dele Akinwole, Babatunde; M. Ajide, Folorunsho
  2. Strategic Similarity in Mergers and Acquisitions By Tina Oreski
  3. Not a Typical Firm: The Joint Dynamics of Firms, Labor Shares, and Capital–Labor Substitution By Joachim Hubmer; Pascual Restrepo
  4. Does the Legal Form Matter for Firm Performance in the MENA Region? By Issam Abdo Ahmad; Ali Fakih
  5. The impact of import barriers on firm performance: Evidence from Import Licenses in Argentina By Federico Bernini; Ezequiel Garcia Lembergman
  6. Immigrant Workers, Firm Export Performance and Import Competition By Léa Marchal; Giulia Sabbadini
  7. Employment Differentiation, Minimum Wages and Firm Exit By Hernán Vallejo
  8. Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Horizontal Mergers By Andrew Sweeting; Xuezhen Tao; Xinlu Yao
  9. Judge Bias in Labor Courts and Firm Performance By Pierre Cahuc; Stéphane Carcillo; Berengere Patault; Flavien Moreau
  10. Towards a framework to understand the relative performance of state-owned firms By Estrin, Saul
  11. Fair and Inclusive Markets: Why Dynamism Matters By Philippe Aghion; Reda Cherif; Fuad Hasanov
  12. International Taxation and Productivity Effects of M&As By Maximilian Todtenhaupt; Johannes Voget
  13. Differentiation in a Two-Dimensional Market with Endogenous Sequential Entry By Jeffrey D. Michler; Benjamin M. Gramig

  1. By: Dele Akinwole, Babatunde (University of Lagos, Akoka, Lagos, Nigeria); M. Ajide, Folorunsho (University of Ilorin, Ilorin)
    Abstract: The fallout from the financial crisis has placed a heavier focus on best practices for corporate governance principles. Boards of directors feel more pressure than ever before to be transparent and accountable. The study examined the effect of board size and its independence on the performance of listed entities in Nigeria. It further determined the effect of board diligence and board diversity on the performance of quoted firms in Nigeria. These were with the view of examining the relationship that exists between board characteristics and performance of quoted firms in Nigeria. The study which covered a ten-year period (2009–2018) made use of secondary data sourced from published annual reports and accounts of 35 purposively selected listed companies on the Nigerian Stock Exchange (NSE). The Pooled Ordinary Least Square (OLS) and Generalised least square method of regression techniques were employed in analyzing the data obtained. Findings from the study revealed that a significant negative relationship exists between earnings per share and board size with a coefficient of -0.33 and p-value of 0.0095 (>0.01) and between earnings per share and board diligence with coefficients of -0.43 and -0.48 and p-value of 0.02 (>0.05) and 0.0095 (>0.01) respectively, but no significant relationship exists between earnings per share and board independence with coefficients of -2.67 and –1.64 and p-value of 0.0218 and 0.49 respectively and between earnings per share and board gender diversity with coefficients of 0.06 and 0.08 and p-value of 0.42 and 0.36 respectively.The study concluded that board size and board diligence have impact on the performance of quoted companies in Nigeria, while board independence and gender diversity do not have effect on the performance of quoted firms in Nigeria. It was recommended small board size of diverse educational background and wide experiences of members, and regular meetings to discuss matters that concern the performance of firms.
    Keywords: Corporate Governance; independent directors; board characteristics; Performance
    Date: 2020–01–05
  2. By: Tina Oreski (Swiss Finance Institute)
    Abstract: Using textual analysis and the firm life-cycle theory to proxy for a company's competitive strategy, this paper empirically examines the strategic similarity hypothesis. The findings show that merger and acquisition transactions are more likely between firms with the same strategy. Moreover, when the acquirer and the target firm compete based on one strategy, the deal yields higher stock returns and stronger future asset growth. The effect is more pronounced in a highly competitive environment, consistent with the strategic misalignment acting as a constraint to the merged company's optimal response. Overall, the results reveal that synergies obtained from the overlapping strategies constitute an important determinant of public merger and acquisition deals.
    Keywords: mergers and acquisitions, competitive strategy, synergies, firm life-cycle, textual analysis
    JEL: L21 G34 M21
    Date: 2021–03
  3. By: Joachim Hubmer; Pascual Restrepo
    Abstract: The decline in the U.S. labor share is far from uniform across firms. While the aggregate labor share has declined, especially in manufacturing, retail, and wholesale, the labor share of a typical firm in these industries has risen. This paper studies the dynamics of the substitution of capital for labor at the firm level and its implications for market structure and labor shares. We introduce a model of firm dynamics where firms make costly upfront investments to adopt the capital-intensive technologies required to automate additional tasks. Following a decline in the price of capital, large firms automate more of their tasks and become more capital intensive; while the median firm continues to operate a more labor-intensive technology. In line with firm-level data, our model generates transitions in which the labor share of the median firm increases at the same time as the aggregate labor share declines. We use an extension of our model that allows for endogenous markups to study the role of rising competition and reallocation towards more productive and higher-markup firms as another driver of the decline in the labor share during 1982–2012. We provide a quantitative decomposition showing that reallocation played a minor role in explaining the decline in the labor share in U.S. manufacturing but an important role in retail and other sectors. The substitution of labor with cheaper capital in a widening range of tasks played a more dominant role in explaining the decline of the manufacturing labor share.
    JEL: E22 E23 E24 E25
    Date: 2021–03
  4. By: Issam Abdo Ahmad; Ali Fakih
    Abstract: This paper attempts to study the relationship between firm legal form and firm performance in the Middle East and North Africa Region (MENA) using the World Bank Enterprise Survey (WBES) database. Our analysis shows that open shareholding, closed shareholding, partnership, and limited partnership companies demonstrate an advantage in terms of annual sales and annual productivity growth rates over sole proprietorship firms, and that medium-sized and large-sized firms also demonstrate an advantage over small ones. Our analysis also shows that foreign ownership, exporting activities, the usage of the web in communication with clients and suppliers, and the presence of full-time workers positively affect firm performance. These findings are robust when running the analysis for firms with female participation in ownership. This paper provides directions for strategists targeting at improving the performance of firms.
    Keywords: Legal Form,Firm Performance,MENA Region,
    JEL: C10 G30 L25
    Date: 2021–03–30
  5. By: Federico Bernini; Ezequiel Garcia Lembergman
    Abstract: In recent decades, the relative importance of non-tariff measures has increased as part of the countries' trade policy. In this paper, we study the impact of non-automatic import licenses (NAIL) on firms' performance. We use a comprehensive data of Argentinian firms between 2000 and 2011 and exploit exogenous variability in the timing of the import barriers imposed to Argentinian products. Not surprisingly, we find that trade barriers reduce imports for those firms that are more exposed to the policy. A firm at the fifty percentile of exposure to NAILS (15% of its imported inputs) reduce its total imports 7.5%. While larger firms are able to attenuate the impact by changing the bundle of inputs, smaller firms experience higher declines in amount of imports. The negative effect of NAILs on imports yields to a considerably decline in firms' total exports. A firm at the fifty percentile of exposure to NAILS reduce its exports in 5.5%. This implies that the elasticity of exports with respect to imports is 0.75. The negative impact of NAILs is relatively higher for exporters of differentiated goods to destinations outside the Mercosur and for smaller firms. Our results suggest that the application of non-technical barriers to imports made Argentinian firms less competitive in export markets.
    Keywords: Import licensing, Exports, Impact evaluation
    JEL: D22 F10 F13 F14
    Date: 2020–11
  6. By: Léa Marchal (Université Paris 1 Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES)); Giulia Sabbadini (Graduate Institute of International and Development Studies - The Geneva Graduate Institute)
    Abstract: This paper investigate whether the employment of immigrant workers affects the performance of firms in their export markets when they are facing an increase in import competition. Exploiting the surge of Chinese imports following its accession to the World Trade Organization and using a sample of French manufacturing exporters from 2002 to 2015, we find that an increase in the growth rate of Chinese imports in a market has a negative effect on both the survival probability of firms and the growth rate of sales on that market. This negative effect on firm performance is mitigated by the employment of immigrant workers
    Keywords: Firm; Heterogeneity; Immigrant workers; Import competition; Productivity
    JEL: F14 F22 F16
    Date: 2021–03
  7. By: Hernán Vallejo
    Abstract: The economic literature acknowledges that labor markets can often be described by monopsonistic competition. In such a structure, employers have market power and in the long run, zero profits due to the free entry and exit of firms. This article builds a model to analyze the role of minimum wages when employment is differentiated. It shows that first best and second best minimum wages can increase employment and improve efficiency by reducing market power, at the expense of having firm exit, higher concentration among employers, and less employment variety. As such, this article can provide insights on the higher firm exit rates observed among new, small and lower productivity firms.
    Keywords: Employment differentiation, residual supply, firm exit, and minimum wage.
    JEL: D21 J21 J31
    Date: 2021–03–24
  8. By: Andrew Sweeting; Xuezhen Tao; Xinlu Yao
    Abstract: We model differentiated product pricing by firms that possess private information about serially-correlated state variables, such as their marginal costs, and can use prices to signal information to rivals. In a dynamic game, signaling can raise prices significantly above static complete information Nash levels even when the privately observed state variables are restricted to lie in narrow ranges. We calibrate our model using data from the beer industry, and we show that our model can explain changes in price levels and price dynamics after the 2008 MillerCoors joint venture.
    JEL: D43 D82 L13 L41 L90
    Date: 2021–03
  9. By: Pierre Cahuc; Stéphane Carcillo; Berengere Patault; Flavien Moreau
    Abstract: Does labor court uncertainty and judge subjectivity influence firms’ performance? We study the economic consequences of judge decisions by collecting information on more than 145,000 Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias has statistically significant effects on the survival, employment, and sales of small low-performing firms. However, we find that the uncertainty associated with the actual dispersion of judge bias is small and has a non-significant impact on their average outcomes.
    Keywords: Employment;Wages;Economic and financial statistics;Labor;Return on investment;Dismissal compensation,judge bias,firm survival,WP,pro-worker bias,appeal court rulings database,firm's employment,judge level
    Date: 2021–02–12
  10. By: Estrin, Saul
    Abstract: This paper considers the factors influencing the comparative performance of state-owned and privately-owned enterprises (SOE/POE). The economics literature has argued that firm performance is influenced by governance arrangements, leading to expectations of inferior performance from SOEs. Meanwhile, a political economy literature classifies countries according to the model of state engagement, which also has implications for SOE performance. We combine these two frameworks to provide a taxonomy. The first framework relating to governance concerns the relationship between owners and managers, the relationship between large and small owners, and the functioning of the managerial labour market. The second framework considers three types of model of state engagement: the Welfare State, the Developmental State, and the Predatory State. Each of the six resulting taxonomies yields distinct outcomes in terms of SOE versus POE performance. In all models, SOEs perform better in a better governance environment than in a worse governance environment, and this ranking is the same in Welfare States and Predatory States. However, in Developmental States with strong governance, SOEs may outperform POEs if they can benefit from superior state resources.
    Keywords: firm performance; governance; institutions; model of state engagement; state-owned firms
    JEL: R14 J01 J1
    Date: 2020
  11. By: Philippe Aghion; Reda Cherif; Fuad Hasanov
    Abstract: We show empirical evidence that there may not be a tradeoff between market income inequality and high sustained growth, which is key for poverty alleviation. We argue that the economies that achieved high sustained growth and low market income inequality are characterized by dynamism—a drive toward sophisticated export industries, innovation, and creative destruction and a high level of competition. What a country produces and how much it competes domestically and internationally are important for achieving fair and inclusive markets. We explore policy options to steer industrial and market structures toward providing growth opportunities for both workers and firms.
    Keywords: Income inequality;Inclusive growth;Competition;Income;Income distribution;Inequality,creative destruction,market power,industrial policy,sophistication,innovation,manufacturing,WP,monopsony power,panel data,supply firm,laggard firm,technology company
    Date: 2021–02–05
  12. By: Maximilian Todtenhaupt; Johannes Voget
    Abstract: We investigate how changes in firm productivity after M&As are affected by differences in profit taxation between the target and the acquirer. We argue that tax differentials distort the efficient allocation of productive factors following an M&A and thus inhibit the realization of productivity improvements. Using firm-level data on inputs and outputs of production as well as on corporate M&As, we show that the absolute tax differential between the locations of two merging firms reduces the subsequent total factor productivity gain. This effect is concentrated in horizontal M&As and less pronounced when firms can use international profit shifting to attenuate effective differences in taxation.
    Keywords: M&A, productivity, international taxation
    JEL: F23 H25
    Date: 2021
  13. By: Jeffrey D. Michler; Benjamin M. Gramig
    Abstract: Previous research on two-dimensional extensions of Hotelling's location game has argued that spatial competition leads to maximum differentiation in one dimensions and minimum differentiation in the other dimension. We expand on existing models to allow for endogenous entry into the market. We find that competition may lead to the min/max finding of previous work but also may lead to maximum differentiation in both dimensions. The critical issue in determining the degree of differentiation is if existing firms are seeking to deter entry of a new firm or to maximizing profits within an existing, stable market.
    Date: 2021–03

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