nep-bec New Economics Papers
on Business Economics
Issue of 2022‒02‒14
eight papers chosen by
Vasileios Bougioukos
London South Bank University

  1. The UK Productivity Puzzle: Does Firm Cohort matter for their Performance following the Financial Crisis? By Mustapha Douch; Huw Edwards; Sushanta Mallick
  2. Assessing EU Merger Control through Compensating Efficiencies By Pauline Affeldt; Tomaso Duso; Klaus Gugler; Joanna Piechucka
  3. Earnings dynamics and firm-level shocks By Benjamin Friedrich; Lisa Laun; Costas Meghir; Luigi Pistaferri
  4. Broadband and Productivity: Structural Estimates for Germany By Tomaso Duso; Mattia Nardotto; Alexander Schiersch
  5. International ownership and SMEs in Middle Eastern and African economies By Baliamoune-Lutz, Mina; Basuony, Mohamed A. K.; Lutz, Stefan; Mohamed, Ehab K. A.
  7. Vulnerable to the Virus: Globally-Oriented Manufacturing Firms at Risk From the Spread of COVID-19 By Karl Jandoc; Adrian Mendoza; Stella Luz Quimbo
  8. Climate Talk in Corporate Earnings Calls By Dzieliński, Michał; Eugster, Florian; Sjöström, Emma; Wagner, Alexander F.

  1. By: Mustapha Douch (Bank of Lithuania, The University of Edinburgh); Huw Edwards (Loughborough University); Sushanta Mallick (Queen Mary University)
    Abstract: This paper provides empirical evidence on how the aftermath of the 2008 crisis affected firm productivity in the UK, taking account of the cohort effect of firms established after 2008. We test this using firmspecific and time-varying credit scores to capture firms’ ability to access credit. To overcome the identification problem, a matched sample based on firm’s credit score, firm age, size and ownership status is used by undertaking the propensity score matching approach. While we find evidence that smaller firm size and changes in credit conditions affect productivity, about half of the difference in productivity remains unexplained. We extend the matching analysis to examine sectors and cohorts, and find that, during 2011-2016, the low productivity is driven primarily by newer firms operating in the services sector, rather than in manufacturing. Within services, the underlying productivity puzzle is driven by a cessation of growth in high-productivity financial services, while abundant labour supply has led to a ‘levelling down’ of performance of newer firms in the rest of services, in line with relatively lowproductivity manufacturing.
    Keywords: : Total Factor Productivity, Cohort, Crisis, Firm Survival, Credit Score.
    JEL: E00 D24 E30 G21
    Date: 2022–01–31
  2. By: Pauline Affeldt; Tomaso Duso; Klaus Gugler; Joanna Piechucka
    Abstract: Worldwide, the overwhelming majority of large horizontal mergers are cleared by antitrust authorities unconditionally. The presumption seems to be that efficiencies from these mergers are sizeable. We calculate the compensating efficiencies that would prevent a merger from harming consumers for 1,014 mergers affecting 12,325 antitrust markets scrutinized by the European Commission between 1990 and 2018. Compensating efficiencies seem too large to be achievable for many mergers. Barriers to entry and the number of firms active in the market are the most important factors determining their size. We highlight concerns about the Commission’s merger enforcement being too lax.
    Keywords: Compensating efficiencies, Efficiency gains, Merger control, Concentration, Screens, HHI, Mergers, Unilateral Effects, Market Definition, Entry barriers
    JEL: L19 L24 L40 K21
    Date: 2021
  3. By: Benjamin Friedrich (Institute for Fiscal Studies); Lisa Laun (Institute for Fiscal Studies); Costas Meghir (Institute for Fiscal Studies and Yale University); Luigi Pistaferri (Institute for Fiscal Studies and Stanford University)
    Abstract: We use matched employer-employee data from Sweden to study the role of the firm in affecting the stochastic properties of wages. Our model accounts for endogenous participation and mobility decisions. We find that firm-specific permanent productivity shocks transmit to individual wages, but the effect is mostly concentrated among the high-skilled workers. For low-skilled the pass-through is similar for temporary and permanent firm-level shocks and the magnitude smaller. The updates to worker-firm specific match effects over the life of a firm-worker relationship are small. Substantial growth in earnings variance over the life cycle for high-skilled workers is driven by firms. In particular, cross-sectional wage variances by age 55 are roughly one-third higher relative to a scenario with no pass-through of firm shocks onto wages.
    Date: 2021–10–07
  4. By: Tomaso Duso; Mattia Nardotto; Alexander Schiersch
    Abstract: We study the impact of broadband availability on firms’ total factor productivity (TFP) using German firm-level data between 2010 and 2015. We adopt a control function approach to causally identify and separately estimate productivity for 46 two-digit manufacturing and service sectors. Over the sample period, broadband availability, measured by 16 Mbps transmission rates, more than doubled in German municipalities. While this increased broadband availability has almost no effect on firms’ productivity in manufacturing, it significantly increases TFP in most service sectors. Yet, the size of the effect is heterogenous across industries.
    Keywords: broadband internet, productivity, firm-level data
    JEL: D24 D22 J24 O14 O22 O33
    Date: 2021
  5. By: Baliamoune-Lutz, Mina; Basuony, Mohamed A. K.; Lutz, Stefan; Mohamed, Ehab K. A.
    Abstract: Empirical evidence suggests that international ownership of local firms supports firm performance and growth through various channels such as financing, technology transfer, and improved access to international markets. This is particularly true for small and medium-sized enterprises (SMEs) that otherwise may lack access to a variety of vital resources. At the same time small and medium-sized enterprise (SME) formation may promote economic development. The relationship between firm performance and international ownership has been well explored for firms in developed economies but this is not the case for firms - including SMEs - in Africa and the Middle East. Largely due to lack of relevant cross-country financial data, existing literature on African and Middle-Eastern firms has presented survey-based evidence on firm performance while evidence based on detailed financial information remains lacking. The present paper aims at filling this research gap. We identify African and Middle-Eastern SMEs operating in the formal sector and examine the impact of ownership structure on firm performance. We use cross-sectional financial data covering about 25,500 companies - including about 30% SMEs - in 69 African and Middle-Eastern countries for the years 2006 to 2015. Our results indicate that international ownership has significant positive association with firm performance. For internationally-owned SMEs this appears to be true despite lower levels of equity and debt capital, implying that internationally-owned firms use international resources - other than capital - more efficiently!
    Date: 2022
  6. By: Priit Vahter; Maaja Vadi
    Abstract: This paper explores the dynamic nature of complementarities between technological and organizational innovation at firms. Using Spanish firm level panel data (PITEC) over period 2008-2016, it investigates how the formation, keeping and ending of the joint adoption of these two core types of innovation is associated with firm performance. In the case of the general static test of complementarities we find no evidence of complementarities. However, once we focus on the analysis of within-firm changes in the complementarity bundle of innovation types, we observe clear evidence that some sequential as well as simultaneous strategy switches towards combining technological and organizational novelties are associated with significant performance premia at firms. Our findings point out the key role of technological innovation in these complementarities. We find evidence of sequential complementarity only when organizational innovation is added to the already existing technological innovation at the firm, not when organizational innovation is added as first component before technological innovation. In the case of dissolving the complementarity bundle of innovation types, the key disadvantage for the firm is related to dropping the technological innovation. Giving up only organizational innovation while keeping the technological innovation appears to have no negative effect, on average, on firm performance.
    Keywords: technological innovation, organizational innovation, complementarities, sequential complementarity
    Date: 2022
  7. By: Karl Jandoc (School of Economics, University of the Philippines Diliman); Adrian Mendoza (School of Economics, University of the Philippines Diliman); Stella Luz Quimbo (House of Repsesentatives, Batasan Complex, Constitution Hills, Quezon City)
    Abstract: We use a unique Philippine firm-level database consisting of trade transactions data merged with firm surveys of manufacturing establishments covering the period from 2013 to 2019 to examine which exporting and importing firms are potentially vulnerable to the economic slowdown brought about by the spread of COVID-19. We find that the exposure of Philippine trade to the COVID-19 affected countries is substantial, accounting for more than half of the value of both exports and imports. Those that stand to lose the most are firms connected to the global value chains that simultaneously export and import. Around 370,000 workers from these firms are at risk. While large firms are able to withstand, to some extent,the COVID-19 shock, SMEs do not have such capability. We find that the profile of these SMEs is substantially different than that of the larger firms in terms of product composition. These SMEs export food and food products which are highly perishable and more sensitive even to short-term vicissitudes in global demand. Given these, we estimate the subsidy needed to support both SMEs and large firms. For SMEs, we compute the subsidy to be Php9.4 billion pesos for 2020. The amount of subsidy increases to Php33.2 billion if large firms were also subsidized for their losses. Identifying the specific mechanism by which such subsidies will be provided to firms of various sizes (e.g. SMEs vs large) requires further study.
    Keywords: COVID-19; Philippine Firms; Stimulus Package
    JEL: O14 L11 H25
    Date: 2020–03
  8. By: Dzieliński, Michał (Stockholm Business School, Stockholm University); Eugster, Florian (Mistra Center for Sustainable Markets (Misum)); Sjöström, Emma (Mistra Center for Sustainable Markets (Misum)); Wagner, Alexander F. (University of Zurich, CEPR, ECGI, and Swiss Finance Institute)
    Abstract: Climate change is a major concern for many companies, but it has not historically featured much in earnings conference calls. We find a marked increase in climate talk on these calls in recent years. We also find that climate talk is negatively related to the change in CO2 emissions (especially Scope 2) in the year after the call, particularly in firms with high overall environmental and governance ratings. Conversely, investors react particularly negatively to climate talk when it comes from a firm with low levels of ESG performance or following poor earnings performance. Finally, a firm employs more climate talk when it is more material, when there is greater shareholder pressure or when it is better prepared for climate-related disclosure. Overall, these results suggest that investors and other stakeholders interested in corporate climate action should be paying attention to earnings conference calls as a source of useful information about companies’ broader stance on climate-related issues.
    Keywords: climate talk; earnings calls; sustainability; CO2 emissions; greenwashing
    JEL: D83 G14 G34 G41 Q54
    Date: 2022–01–29

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