nep-bec New Economics Papers
on Business Economics
Issue of 2022‒01‒17
eleven papers chosen by
Vasileios Bougioukos
London South Bank University

  1. The Good have a Website Evidence on website premia for firms from 18 European countries By Joachim Wagner
  2. Entry, Variable Markups, and Business Cycles By William L. Gamber
  3. Labor-share dynamics -The role of import competition By Paulie, Charlotte
  4. With a little help from my website Firm survival and web presence in times of COVID-19 – Evidence from 10 European countries By Joachim Wagner
  5. Corporate Finance and the Transmission of Shocks to the Real Economy By Falk Bräuning; José Fillat; Gustavo Joaquim
  6. On the Estimation of Cross-Firm Productivity Spillovers with an Application to FDI By Malikov, Emir; Zhao, Shunan
  7. On the Origins of the Multinational Premium By José Fillat; Stefania Garetto
  8. Aggregate Skewness and the Business Cycle By Iseringhausen, Martin; Theodoridis, Konstantinos
  9. Networks of news and cross-sectional returns By Hu, Junjie; Härdle, Wolfgang
  10. From Immigrant Entrepreneurship to Plurinational Firms: Evidence from Italy By Arrighetti, Alessandro; Gnarini, Daniela; Lasagni, Andrea; Semenza, Renata
  11. 2021 Survey of Small Enterprises’ Financial Literacy: Main Results By Brindusa Anghel; Aitor Lacuesta; Federico Tagliati

  1. By: Joachim Wagner (Leuphana University, Lueneburg, Institute for the World Economy, Kiel, and IZA, Bonn)
    Abstract: This paper uses firm level data from the World Bank Enterprise surveys conducted in 2019 in 18 European countries to investigate the link between having a website and firm characteristics. We find that firms which are present in the web are larger, older, more productive, and more often exporters, product innovators, process innovators and (partly) foreign owned firms than firms without a website. The estimated website premia are statistically highly significant ceteris paribus after controlling for country and sector of economic activity. Furthermore, the size of these premia can be considered to be large. Good firms tend to have a website.
    Keywords: Website premia, firm characteristics, World Bank Enterprise Surveys
    JEL: D22 L25
    Date: 2021–04
  2. By: William L. Gamber
    Abstract: The creation of new businesses declines in recessions. In this paper, I study the effects of pro-cyclical business formation on aggregate employment in a general equilibrium model of firm dynamics. The key features of the model are that the elasticity of demand faced by firms falls with their market share and that adjustment costs slow the reallocation of employment between firms. In response to a decline in entry, incumbent firms' market shares increase, their elasticity of demand falls, and they increase their markups and reduce employment. To quantify the model, I study the relationship between variable input use and revenue in panel data on large firms. Viewed through the lens of my model, my estimates imply that for large firms, the within-firm elasticity of the markup to relative sales is 25 percent. I use the calibrated model to study shocks to entry, finding that a fall in entry can lead to a significant contraction in employment. A shock to entry that replicates the decline in the number of businesses during the Great Recession generates a prolonged 2.5 percent fall in employment in the model. Finally, I show that the declining correlation between revenue and variable input use over the past 30 years implies that the effect of entry on the business cycle has become stronger over time.
    Keywords: Macroeconomics; Heterogeneous firms; Business dynamics; Variable markups
    JEL: E24 E32 J23 L20
    Date: 2021–12–02
  3. By: Paulie, Charlotte (Uppsala University,)
    Abstract: Does increasing product-market competition from foreign firms affect domestic labor shares? By combining detailed Swedish firm-level data with an instrumental variable design, I show that an increase in import penetration caused by increased global competition results in a decrease in domestic industry-level labor shares. The decrease comes both from a reallocation of firms’ market shares and a fall in labor shares at the firm level. The analysis shows that the negative effect of competition on firm-level labor shares is driven by an increase in productivity that is not met by a corresponding increase in compensation to labor. I use these findings to calibrate a heterogeneous-firm model where domestic and foreign firms compete on the domestic product market. The calibrated model predicts that an increase in foreign competition corresponding to a one standard deviation increase in import penetration results in a 1.12 percentage point increase in welfare.
    Keywords: Labor Share; Competition; International Trade; Welfare.
    JEL: E25 F10 L11
    Date: 2021–10–15
  4. By: Joachim Wagner (Leuphana University, Lueneburg, Institute for the World Economy, Kiel, and IZA, Bonn)
    Abstract: This paper uses firm level data from the World Bank Enterprise surveys conducted in 2019 and from the COVID-19 follow-up surveys conducted in 2020 in ten European countries to investigate the link between having a website before the pandemic and firm survival until 2020 .The estimated effect of web presence is statistically highly significant ceteris paribus after controlling for various firm characteristics that are known to be related to survival. Furthermore, the size of this estimated effect can be considered to be large on average. A web site helped firms to survive.
    Keywords: Web presence, firm survival, COVID-19, World Bank Enterprise Surveys
    JEL: D22 L20 L25 L29
    Date: 2021–04
  5. By: Falk Bräuning; José Fillat; Gustavo Joaquim
    Abstract: Credit availability from different sources varies greatly across firms and has firm-level effects on investment decisions and aggregate effects on output. We develop a theoretical framework in which firms decide endogenously at the extensive and intensive margins of different funding sources to study the role of firm choices on the transmission of credit supply shocks to the real economy. As in the data, firms can borrow from different banks, issue bonds, or raise equity through retained earnings to fund productive investment. Our model is calibrated to detailed firm- and loan-level data and reproduces stylized empirical facts: Larger, more productive firms rely on more banks and more sources of funding; smaller firms mostly rely on a small number of banks and internal funding. Our quantitative analysis shows that bank credit supply shocks lead to a sizable reduction in aggregate output, with substantial heterogeneity across firms, due to the lack of substitutability among alternative credit sources. Finally, we show that our insights have important implications for the validity of standard empirical methods used to identify credit supply effects (Khwaja and Mian 2008).
    Keywords: shock transmission; bank-firm matching; firm financing; credit supply shocks
    JEL: E32 E43 E50 G21 G32
    Date: 2021–11–01
  6. By: Malikov, Emir; Zhao, Shunan
    Abstract: We develop a novel methodology for the proxy variable identification of firm productivity in the presence of productivity-modifying learning and spillovers which facilitates a unified "internally consistent" analysis of the spillover effects between firms. Contrary to the popular two-step empirical approach, ours does not postulate contradictory assumptions about firm productivity across the estimation steps. Instead, we explicitly accommodate crosssectional dependence in productivity induced by spillovers which facilitates identification of both the productivity and spillover effects therein simultaneously. We apply our model to study cross-firmspillovers in China’s electric machinery manufacturing, with a particular focus on productivity effects of inbound FDI.
    Keywords: Production Economics, Productivity Analysis
    Date: 2022–01
  7. By: José Fillat; Stefania Garetto
    Abstract: How do foreign direct investment (FDI) dynamics relate to the risk premium of a firm? To answer this question, we compare the stock returns of US firms with different FDI and mergers and acquisitions (M&A) exposure to study the evolution of stock returns as firms expand into foreign markets. We document three empirical regularities. First, there are cross-sectional risk premia associated with both multinational activity and mergers and acquisitions. Second, firm-level stock returns decline when a firm undertakes M&A activity and with merger deepening. Third, future multinational acquirers already have higher stock returns compared with domestic non-acquirers prior to entering foreign markets, indicating that cross-sectional returns differentials are driven by selection based on common unobserved firm characteristics. We find that CEOs play a role in explaining the relationship between firms’ risk premia and foreign expansion. To rationalize these facts, we develop a dynamic model in which management attitudes shape the relationship between firm characteristics, selection into FDI, and risk premia.
    Keywords: multinational firms; mergers and acquisitions; stock returns; management
    JEL: F12 F23 F36
    Date: 2021–10–01
  8. By: Iseringhausen, Martin (European Stability Mechanism); Theodoridis, Konstantinos (European Stability Mechanism and Cardiff Business School)
    Abstract: We develop a new data-rich measure of aggregate skewness in the US economy, which is highly correlated with GDP growth skewness conditional on past macro-financial data, as well as with the cross-sectional skewness of firm-level employment growth. An exogenous perturbation to the proposed skewness measure identified using simple recursive (Cholesky-type) restrictions delivers dynamics that are nearly indistinguishable from those produced by the main business cycle shock of Angeletos et al. (2020). We document a strong correlation between both shocks that is robust to controlling for standard measures of macroeconomic volatility and uncertainty. Our findings reinforce previous studies on the impact of skewness shocks despite different methodologies.
    Keywords: Asymmetry, principal component analysis, quantile regression, VAR
    JEL: C22 C38 E32
    Date: 2021–12
  9. By: Hu, Junjie; Härdle, Wolfgang
    Abstract: We uncover networks from news articles to study cross-sectional stock returns. By analyzing a huge dataset of more than 1 million news articles collected from the internet, we construct time-varying directed networks of the S&P500 stocks. The well-defined directed news networks are formed based on a modest assumption about firm-specific news structure, and we propose an algorithm to tackle type-I errors in identifying the stock tickers. We find strong evidence for the comovement effect between the news-linked stocks returns and reversal effect from the lead stock return on the 1-day ahead follower stock return, after controlling for many known effects. Furthermore, a series of portfolio tests reveal that the news network attention proxy, network degree, provides a robust and significant cross-sectional predictability of the monthly stock returns. Among different types of news linkages, the linkages of within-sector stocks, large size lead firms, and lead firms with lower stock liquidity are crucial for cross-sectional predictability.
    Keywords: Networks,Textual News,Cross-Sectional Returns,Comovement,Network Degree
    JEL: G11 G41 C21
    Date: 2021
  10. By: Arrighetti, Alessandro; Gnarini, Daniela; Lasagni, Andrea; Semenza, Renata
    Abstract: The article contributes to the current debate on the relationship between migration and entrepreneurship, highlighting the evolution of processes and practices, from the traditional monoethnic firm towards new models, we defined as “plurinational”. It refers precisely to the cases, widespread in the evolving cosmopolitan society, where both entrepreneurs and workers belong to different nationalities. The article outlines the findings of a qualitative research study, based on interviews with a series of entrepreneurs of plurinational firms in Italy. Firstly, we found that plurinational firms originate from “weak ties” (through acquaintances and previous work experiences) rather than “strong ties” (through family and co-ethnic community networks). Secondly, far for being univocal models, we found a variety of plurinational entrepreneurships which derives from different scales of priority assigned by ownership or management to plurinationalism as “opportunity” or plurinationalism as “value”.
    Keywords: immigrant entrepreneurship,plurinationalism,migration,break-out strategies,organizational diversity,Italy
    Date: 2021
  11. By: Brindusa Anghel (Banco de España); Aitor Lacuesta (Banco de España); Federico Tagliati (Banco de España)
    Abstract: This paper analyses the financial literacy of Spanish enterprises with fewer than 50 employees (small enterprises) based on a survey conducted by the Banco de España between March and May 2021 as part of a project launched by the Organisation for Economic Co-operation and Development’s International Network on Financial Education. The survey includes a series of questions aimed at measuring firms’ financial literacy (financial knowledge, attitudes and behaviour) and the financial instruments held by them, the impact of the COVID-19 crisis on their activity and their level of digitalisation. The business owners should answer these questions as long as they are involved in taking financial decisions for the business. The main results of the survey suggest that, in Spain, owners of enterprises with fewer than 20 employees have little financial knowledge compared with those of enterprises with 20 to 49 employees. The same is true of firms in the accommodation and food service activities, construction and real estate activities, and other personal services sectors (the latter being a mixed group of sectors which would include firms in education, repairs, laundry services, etc.) compared with firms in other sectors. In terms of financial attitudes, business owners with ten or more employees have a greater tendency to set long-term financial goals than owners of firms with fewer than ten employees. Some financial behaviours (such as having strategies to cope with theft or considering different options for their financial product and service providers) are less widespread among smaller firms, especially those with fewer than five employees. Lastly, the percentage of Spanish small enterprises, regardless of size, whose owners have thought about how they will fund their own retirement is remarkably low. The use of capital instruments and other more recent types of financing (such as sustainable bonds, business angels or crowdfunding) is marginal in small Spanish enterprises. Likewise, the use of property and, particularly, business interruption insurance is limited among these firms. There are no discernible, significant differences in financial knowledge, attitudes or behaviours in terms of the gender of the business owner. Also, in general, the average financial literacy of small enterprises improves with the level of educational attainment only if the owner has specific training in business, economics or finance. Other characteristics positively associated with financial competencies, irrespective of educational attainment, are having more than ten years’ experience as a business owner or having a business owner for a parent. The impact of the COVID-19 crisis on the level of turnover, profit and debt was quite similar for firms with different degrees of financial literacy. However, the negative impact on employment and liquidity was somewhat lower for the higher quartiles of owners’ financial literacy. Additionally, higher financial knowledge was associated with being more likely to apply for and obtain a new loan or benefit from a public guarantee. Firms with less financial knowledge did make greater use of income transfers and rental moratoria. Lastly, there is a positive correlation between financial literacy and a higher pre-pandemic level of digitalisation in the firm. However, there is no such correlation between financial literacy and digital activities following COVID-19.
    Keywords: financial literacy, small enterprises, online survey, COVID-19, digitalisation
    JEL: C81 D25
    Date: 2021–11

This nep-bec issue is ©2022 by Vasileios Bougioukos. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.