nep-bec New Economics Papers
on Business Economics
Issue of 2021‒07‒26
ten papers chosen by
Vasileios Bougioukos
Bangor University

  1. Board director reputation capital and financial performance of listed firms in Nigeria By Peter Ehizokhale Okpamen; Sunday Oseiweh Ogbeide
  2. Director appointments, boardroom networks, and firm environmental performance By Mingyuan Chen; Dakshina De Silva; Aurelie Slechten
  3. The Effect of Board Overlap on Firm Behavior By Heng Geng; Harald Hau; Roni Michaely; Binh Nguyen
  4. The impact of trade on R&D: Evidence from UK firms By S, Minkyu.
  5. The COVID-19 Shock and Productivity-Enhancing Reallocation in Australia: Real-time evidence from Single Touch Payroll By Dan Andrews; Jonathan Hambur; Elif Bahar
  6. Job Search and Hiring with Two-Sided Limited Information about Workseekers' Skills By Carranza, Eliana; Garlick, Robert; Orkin, Kate; Rankin, Neil
  7. Adoption of digital and ICT technologies and firms’ productivity By Zoran Aralica; Bruno Skrinjaric
  8. Technological Change and Domestic Outsourcing By Antonin Bergeaud; Clément Malgouyres; Clément Mazet-Sonilhac; Sara Signorelli
  9. Switching Costs in Competitive Health Insurance Markets: The Role of Insurers’ Pricing Strategies By Lamiraud, Karine; Stadelmann, Pierre
  10. Empirical Framework for Cournot Oligopoly with Private Information By Gaurab Aryal; Federico Zincenko

  1. By: Peter Ehizokhale Okpamen (Elizade University); Sunday Oseiweh Ogbeide (Ambrose Alli University)
    Abstract: This study examined the impact of board director reputation capital on financial performance of listed firms in Nigeria. The population of the study consists of all the listed non-financial firms in Nigeria. A sample of fifty (50) firms was selected and data were collected over the period 2007 to 2018. Descriptive statistics and system general method of moment estimation methods were used to undertake the data analysis. Findings reveal that board director reputational capital exerted a positive and significant impact on financial performance of the firms. Board size and firm size were negative on firm financial performance in the reference period. The study concludes that board reputational capital is a significant driver of corporate financial performance in Nigeria irrespective of the size of the board. Based on the empirical findings, it is recommended that there is need for regulators to design a framework to efficiently and effectively monitor the reputation of executive board directors and managers in firms. This will assist to check mate agency costs, demonstration of opportunistic behavior capable of destroying the firm value, There is need for firms to encourage adequate interlocking members who have diverse professional training, high social net worth and experience (experience hypothesis) to positively influence effective management and financial performance of listed firms in Nigeria.
    Keywords: board reputational capital,board size,firm size,financial performance,Nigeria
    Date: 2020–12–30
  2. By: Mingyuan Chen; Dakshina De Silva; Aurelie Slechten
    Abstract: Using BoardEx (2000{2017), we create a dynamic network connecting firms and board directors for the United States. We use the Environmental Protection Agency's Toxic Release Inventory to measure environmental performance at the director and rm-level. We examine how a candidate's environmental performance and networks affect director appointments. This allows us to endogenize the effect of directors' environmental experience when studying the impact on firms' chemical releases. We show that firms are likely to appoint influential directors with good environmental records and similar characteristics. Further, boards with good environmental performance and with diverse environmental backgrounds improve firms' environmental performance.
    Keywords: Network Formation, Firm Organization, Toxic Release, Board of directors
    JEL: D85 L21 Q5
    Date: 2021
  3. By: Heng Geng (Victoria University of Wellington); Harald Hau (University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)); Roni Michaely (The University of Hong Kong; ECGI); Binh Nguyen (Victoria University of Wellington - Victoria University of Wellington, Students)
    Abstract: The staggered introduction of Corporate Opportunity Waivers (COWs) in nine US states since 2000 reduced legal risk to directors serving on multiple boards and increased intra-industry board overlap in firms characterized by intensive R&D activity. More board overlap results in a higher return on assets, higher profit margins, and higher sales revenues in spite of reduced factor inputs. The higher profitability is observed equally for new board overlap with and without own-board alteration, which rules out improved board quality as an explanation. Instead, higher profitability appears to originate in reduced firm rivalry measured by less innovation activity and increased product market segmentation rather than the synergetic exploitation of more and better corporate opportunities.
    Keywords: Board interlock, corporate opportunity waivers, firm coordination
    Date: 2021–07
  4. By: S, Minkyu.
    Abstract: How does firm innovation respond to changing trade environments? This paper investigates this question using the matched administrative datasets for UK firms' R&D expenditures and their trade exposures between 2002 and 2011. I find a strong adverse impact of import competition from China on UK firms' R&D, which is supportive of the `Schumpeterian hypothesis'. There is no evidence that the improved access to Chinese inputs for individual firms offset this negative competition channel. Increased export demand, by contrast, significantly stimulates firms' innovation efforts. Our results also reveal heterogeneity in the R&D responses depending on the firms' initial conditions: First, more productive British firms raise their R&D spending by much more in response to increased foreign demand. Second, exporters reduce R&D by less than non-exporters in the face of the rising Chinese competition. These findings together imply that innovation of purely domestic and less profitable firms was most hurt by globalization, leading to a widening productivity gap across firms.
    Keywords: R&D, Chinese competition, Firm-level trade
    JEL: F14 F60 O31
    Date: 2021–07–08
  5. By: Dan Andrews; Jonathan Hambur; Elif Bahar
    Abstract: The consequences of the pandemic for potential output will partly hinge on its impact on high productivity firms, and more generally the ongoing process of productivity-enhancing reallocation – the rate at which scarce resources are reallocated from less productive to more productive firms. While Schumpeter (1939) originally proposed that recessions can accelerate this process, the more ‘random’ nature of the COVID-19 shock coupled with a policy response that prioritised preservation (over reallocation) raises questions about whether job reallocation remained productivity-enhancing over the course of the pandemic. Despite these headwinds, our analysis based on novel high-frequency employment data for Australia shows that job reallocation (and firm exit) remained solidly connected to firm productivity over 2020. The greater resilience of high productivity firms is significant, given that an indiscriminate shakeout of such firms – and the associated destruction of firm-specific intangible capital – would have imparted significant scarring effects. As it turns out, the temporary nature of Australia’s job retention scheme (JobKeeper) made an important (and surprising) positive contribution to this process, with material consequences for aggregate productivity. But the scheme appears to have become more distortive over time, justifying its timely withdraw – on productivity grounds at least.
    Keywords: COVID-19, productivity, reallocation, recessions
    JEL: E24 E32 J63 O4
    Date: 2021–07–22
  6. By: Carranza, Eliana (World Bank); Garlick, Robert (Duke University); Orkin, Kate (CSAE); Rankin, Neil (Stellenbosch University)
    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 the design of information-provision mechanisms.
    Keywords: skills, job search, employment, wages, labor markets, active labor market
    JEL: J23 J24 J31 J41 O15 O17
    Date: 2021–07
  7. By: Zoran Aralica (The Institute of Economics, Zagreb); Bruno Skrinjaric (The Institute of Economics, Zagreb)
    Abstract: This paper has two main goals. First, it aims to answer the question on how the usage of ICT and digital technologies affects firm productivity. Second, it aims to analyze how change in the share of the manufacturing sector and/or the service sector in a given region direct changes in firm productivity. The analysis was carried out using a financial dataset of Croatian enterprises in the period from 2009 to 2019 and Eurostats’ Digital Economy and Society data, based on “Community survey on ICT usage and ecommerce in enterprises”. The data were analyzed using principal component analysis and panel data methods. The results indicate a positive relationship between adoption of ICT technologies and firm productivity, and a negative correlation between adoption of digital technologies and firm productivity. Furthermore, the results show a high degree of deindustrialization of certain regions and a positive correlation between industry intensity in certain regions and firm productivity. Finally, there seems to be a positive premium on productivity for larger-sized firms, firms participating in international trade, companies situated near to key international markets (i.e., located in counties bordering with the City of Zagreb).
    Keywords: ICT, digital technologies, economy structure, productivity, Croatia
    JEL: O14 O33
    Date: 2021–04
  8. By: Antonin Bergeaud (Banque de France - Banque de France - Banque de France); Clément Malgouyres (IPP - Institut des politiques publiques, PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Clément Mazet-Sonilhac (Banque de France - Banque de France - Banque de France, Institut d'Études Politiques [IEP] - Paris); Sara Signorelli (UvA - University of Amsterdam [Amsterdam])
    Abstract: Domestic outsourcing has grown substantially in developed countries over the past two decades. This paper addresses the question of the technological drivers of this phenomenon by studying the impact of the staggered diffusion of broadband internet in France during the 2000s. Our results confirm that broadband technology increases firm productivity and the relative demand for high-skill workers. Further, we show that broadband internet led firms to outsource some non-core occupations to service contractors, both in the low and high-skill segments. In both cases, we find that employment related to these occupations became increasingly concentrated in firms specializing in these activities, and was less likely to be performed in-house within firms specialized in other activities. As a result, after the arrival of broadband internet, establishments become increasingly homogeneous in their occupational composition. Finally, we provide suggestive evidence that high-skill workers experience salary gains from being outsourced, while low-skill workers lose out.
    Keywords: Broadband,Firm organization,Labor market,Outsourcing
    Date: 2021–06
  9. By: Lamiraud, Karine (ESSEC Research Center, ESSEC Business School); Stadelmann, Pierre (Service de la santé publique, Etat de Vaud)
    Abstract: Our article deals with pricing strategies in Swiss health insurance markets and focuses on the relationship between basic and supplementary insurance. We analyzed how firms’ pricing strategies (i.e., pricing of basic and supplementary products) can create switching costs in basic health insurance markets, thereby preventing competition in basic insurance from working properly. More specifically, using unique market and survey data, we investigated whether firms use bundling strategies or supplementary products as low-price products to attract and retain basic insurance consumers. To our knowledge, this is the first paper to analyze these pricing strategies in the context of insurance/health insurance. We found no evidence of bundling in the Swiss setting. We did however observe that firms used low-price supplementary products that contributed to lock in consumers. A majority of firms offered at least one of such product at a low price. None offered low-price products in both basic and supplementary markets. Low-price insurance products differed across firms. When buying a lowprice supplementary product, consumers always bought their basic contract from the same firm. Furthermore, those who opted for low-price supplementary products were less likely to declare an intention to switch basic insurance firms in the near future. This result was true for all risk category levels.
    Keywords: Managed Competition; Swiss Health Care Systems; Pricing; Consumer Inertia; Switching Costs; Supplementary Insurance; low-price supplementary product; Bundling
    JEL: I10
    Date: 2020–05–13
  10. By: Gaurab Aryal; Federico Zincenko
    Abstract: We propose an empirical framework for Cournot oligopoly with private information about costs. First, considering a linear demand with a random intercept, we characterize the Bayesian Cournot-Nash equilibrium and determine its testable implications. Then we establish nonparametric identification of the joint distribution of demand and technology shock and firm-specific cost distributions. Finally, we propose a likelihood-based estimation method and apply it to the global crude oil market. Using counterfactuals, we also quantify the effect of firms sharing information about their costs on consumer welfare. We also extend the model to include either firm-specific conduct parameters, nonlinear demand, or selective entry.
    Date: 2021–06

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