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on Business Economics |
| By: | Keller, Wolfgang; Molina, Teresa; Olney, Will |
| 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. |
| Keywords: | Corporate culture; Executive compensation; Gender pay gap; Women |
| JEL: | F16 J16 J24 J33 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15552&r= |
| By: | Chaigneau, Pierre; Sahuguet, Nicolas |
| Abstract: | When assessing managerial ability, a firm can rely on two sources of information: a signal of firm value, such as earnings, and monitoring. We show that a more informative signal can surprisingly increase the value of monitoring. This happens if a more informative signal makes some signal realizations more ambiguous indicators of managerial ability, or if the signal leads to negative belief updating on managerial ability yet does not trigger termination. Then, termination decisions will paradoxically rely less on the signal when it is more informative. In private equity owned firms, the model predicts that monitoring intensity is increasing in signal informativeness conditional on a bad performance. These firms can fall into a "bad governance trap" such that a less informative signal is compounded by worse monitoring upon a bad performance. |
| Keywords: | board monitoring; corporate governance system; governance complementarity; hard and soft information |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15625&r= |
| By: | Sami Alpanda (University of Central Florida, Department of Economics); Sarah Zubairy (Texas A&M University, Department of Economics) |
| Abstract: | In this paper, we analyze the business cycle implications of firms having oligopsony power in labor markets, as well as oligopoly power in product markets, within the context of a New Keynesian dynamic stochastic general equilibrium model with firm entry and exit. Relative to the standard setup with monopolistic competition in both goods and labor markets, the strategic interaction between intermediate goods firms in the current setup results in larger price markups as well as wage markdowns, while the slopes of the aggregate price and wage Phillips curves become flatter. These effects are strengthened in a strongly non-linear fashion as the number of firms in each sector decline. Oligopsonistic labor markets also render wage shocks expansionary, unlike in the standard setup. Results indicate that a secular increase in industry concentration would not only reduce the labor share of income, but also weaken the pass-through from firms' marginal costs to prices and from productivity increases to real wages. |
| Keywords: | Market power, oligopoly, oligopsony, New Keynesian DSGE model, entry-exit. |
| JEL: | E25 E32 L13 |
| Date: | 2021–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:txm:wpaper:20210429-001&r= |
| By: | Kilian Huber |
| 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 L11 L25 N14 N24 N84 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28767&r= |
| By: | Kilian Huber; Volker Lindenthal; Fabian Waldinger |
| 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. |
| JEL: | D22 E60 G30 J7 J71 M12 N24 N34 N8 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28766&r= |
| By: | di Giovanni, Julian; Levchenko, Andrei A.; Mejean, Isabelle |
| Abstract: | This paper uses a dataset covering the universe of French firm-level sales, imports, and exports over the period 1993-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. The largest firms are both important enough to generate aggregate fluctuations (Gabaix, 2011), and most likely to be internationally connected. This implies that foreign shocks are transmitted to the domestic economy primarily through the largest firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 40 to 85% of the impact of foreign fluctuations on French GDP is accounted for by the "foreign granular residual" -- the term capturing the fact that larger firms are more affected by the foreign shocks. At the macro level, firm heterogeneity dampens the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model. |
| Keywords: | Aggregate fluctuations; granularity; input linkages; international trade; shock transmission |
| JEL: | E32 F15 F23 F44 F62 L14 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15458&r= |
| By: | Terovitis, Spyros; Vladimirov, Vladimir |
| Abstract: | This paper shows that manipulative trading by speculators can create value for shareholders by simulating a "buzz" around a firm and turning it into a star. The speculators' profit comes from helping the firm attract stakeholders, such as high-quality employees and business partners, that would have otherwise not worked with it. Thus, price manipulation leads to a misallocation of talent and resources. Similar to speculators, investors in primary markets can benefit from inflating firms' valuations to unicorn status if that helps attract stakeholders. Opportunities for manipulation are asymmetric, as firms can encourage manipulation benefiting them and discourage manipulation harming them by adjusting their corporate governance and transparency. |
| Keywords: | high-skilled employees; manipulation; Market Efficiency; misallocation of resources; Speculation; Stakeholders; Superstar Firms; transparency; unicorns |
| JEL: | D62 D82 D84 G30 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15546&r= |
| By: | Sinan Gokkaya; Xi Liu; René M. Stulz |
| Abstract: | We open the black box of the M&A decision process by constructing a comprehensive sample of US firms with specialized M&A staff. We investigate whether specialized M&A staff improves acquisition performance or facilitates managerial empire building instead. We find that firms with specialized M&A staff make better acquisitions when acquisition performance is measured by stock price reactions to announcements, long-run stock returns, operating performance, divestitures, and analyst earnings forecasts. This effect does not hold when the CEO is powerful, overconfident, or entrenched. Acquisitions by firms without specialized staff do not create value, on average. We provide evidence on mechanisms through which specialized M&A staff improves acquisition performance. For identification, we use the staggered recognition of inevitable disclosure doctrine as a source of exogenous variation in the employment of specialized M&A staff. |
| JEL: | G14 G24 G30 G34 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28778&r= |
| By: | Timothy Grieder; Mikael Khan; Juan Ortega; Callie Symmers |
| Abstract: | Despite COVID-19 challenges, bold policy measures in Canada have helped businesses manage cash flow pressures and kept insolvency filings low. But the impact of the pandemic has been uneven, and the financial health of some firms may further deteriorate over the next year. |
| Keywords: | Coronavirus disease (COVID-19); Credit and credit aggregates; Financial stability; Firm dynamics; Recent economic and financial developments; Sectoral balance sheet |
| JEL: | G38 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocsan:21-8&r= |
| By: | Ekta Sikarwar (Indian Institute of Management Kozhikode) |
| Abstract: | The role of strong corporate governance mechanisms in encouraging value-enhancing risk management activities is well documented by literature. However, the research is scant on investigating the effects of corporate governance on firms’ exchange rate risk. Drawing on the agency theory, this study argues that a firm’s board structure as a firm-level governance mechanism should significantly affect the level of exchange rate risk. Using a sample of 373 firms from 10 emerging markets from Jan 2011-March 2018, this study examines the effects of board attributes such as board size, board composition, board leadership, and board gender diversity on firms’ exposure. The findings reveal that the board size, the proportion of independent directors on board, and the presence of women on board are associated with lower exchange rate risk. Additionally, the effect of the presence of women directors on firms’ exposure becomes stronger when there’s higher board independence. |
| Keywords: | Exchange rate risk, Board of directors, emerging market, Women on board, Firmlevel internal corporate governance |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:407&r= |
| By: | Mauring, Eeva |
| Abstract: | I study limited price discrimination based on search costs. "Shoppers" have a zero and "nonshoppers" a positive search cost. A consumer faces a nondiscriminatory "common" price with some probability, or a discriminatory price. In equilibrium, firms mix over the common and the shoppers' discriminatory prices, but set a singleton nonshoppers' discriminatory price. Less likely price discrimination mostly benefits consumers. An individual firm's profit can increase in the number of firms. These results have important implications for regulations that limit price discrimination via reduced tracking (e.g., EU's GDPR, California's CCPA) and for evaluating competition online based on the number of firms. |
| Keywords: | consumer tracking; cookies; GDPR; Imperfect Competition; Online markets; price discrimination; sequential search |
| JEL: | D43 D83 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15729&r= |
| By: | Demena, B.A.; Msami, J.; Mmari, D.E.; van Bergeijk, P.A.G. |
| Abstract: | Productivity development is a key issue for export-driven growth and development. We use East African Community (EAC) firm-level data. Instead of focusing on single EAC partners, using the World Bank Enterprise Surveys, investigate firm-level productivity difference for seven countries that are part of the COMESA-EAC-SADC tripartite free trade area (TFTA). Using export and ownership dimensions, we identify four types of firms: National Domestic, National Exporters, Foreign Domestic and Foreign Exporters. We find a clear export productivity premium for national manufacturing firms and service sectors, but not for foreign owned firms. We also find clear foreign-ownership productivity premium for both domestic and exporting firms in manufacturing sectors but less clear in services sectors. The gap between national export premium and foreign-ownership premium is stronger in manufacturing firms as opposed to service sectors. Moreover, we find clear and strong productivity premia in size, training programmes and level of development in the manufacturing firms. In the services sector, these premia are always smaller and only significant for medium-sized firms. There is no difference in experience premium between sectors in terms of both significance and magnitude of the estimated coefficients. |
| Keywords: | Productivity, exports, firm heterogeneity, FDI, sub-Saharan Africa, EAC. |
| JEL: | O12 J24 F23 D20 O55 |
| Date: | 2021–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:ems:euriss:135504&r= |
| By: | Isaac Marcelin; Daniel Brink; Wei Sun |
| Abstract: | We study the role of trade credit in enhancing the resilience of financially constrained firms from 2010 to 2017. Implicit borrowing in trade finance allows financially constrained firms to bridge the financing gap, expand employment by 8.26 per cent, and increase average firm profits significantly. Trade finance suppliers, not financially constrained firms, experience a surge of 7.99 per cent in the average rate of sales growth. |
| Keywords: | Financial constraints, trade credit, Employment, Growth, Firm profitability, Corporate finance |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2021-78&r= |
| By: | Ekta Sikarwar (Indian Institute of Management Kozhikode) |
| Abstract: | The objective of this study is to examine the dynamics of asymmetry and nonlinearity in firms’ exchange rate risk during crisis periods. The study investigates the exchange rate exposure of 1,577 firms across 13 industry sectors in 21 countries around the world using an extended Jorion (1990) model. The analysis covers two time periods?January 2017–November 2019 (preCOVID-19 period) and December 2019–November 2020 (COVID-19 period). The results provide evidence of a strong presence and a substantial increase in asymmetric and nonlinear exchange rate exposure of firms during the COVID-19 period. |
| Keywords: | Exchange rate exposure; COVID-19; nonlinear; asymmetry |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:408&r= |