nep-bec New Economics Papers
on Business Economics
Issue of 2023‒04‒24
seven papers chosen by
Vasileios Bougioukos
London South Bank University

  1. CSR and Firm Survival: Evidence from the Climate and Pandemic Crises By Thomas J. Chemmanur; Dimitrios Gounopoulos; Panagiotis Koutroumpis; Yu Zhang
  2. Lending cycles and real outcomes: costs of political misalignment By Bircan, Çağatay; Saka, Orkun
  3. Financial Structure, Firm Size and Financial Growth of Non-Financial Firms Listed at the Nairobi Securities Exchange By David Haritone Shikumo; Oluoch Oluoch; Joshua Matanda Wepukhulu
  4. The Impact of Relative CEO Pay on Employee Productivity By Afzali, Aaron; Oxelheim, Lars; Randøy, Trond; Paulo Vieito, João
  5. Protection of Geographical Indications in Trade Agreements: is it worth it? By Charlotte Emlinger; Karine Latouche
  6. What we can learn by linking firms’ reported emissions with their financial data By Matthew Ackman; Timothy Grieder; Callie Symmers; Geneviève Vallée
  7. Strapped for Cash: The Role of Financial Constraints for Innovating Firms By Esther Ann Bøler; Andreas Moxnes; Karen Helene Ulltveit-Moe

  1. By: Thomas J. Chemmanur (Carroll School of Management); Dimitrios Gounopoulos (University of Bath); Panagiotis Koutroumpis (Queen Mary University of London); Yu Zhang (School of Economics, University College Dublin)
    Abstract: We analyse the relationship between the extent of a firm’s corporate social responsibility (CSR) and its long-term survival probability. We conjecture that a better CSR rating is associated with a lower probability of corporate failure and a longer survival period. Consistent with this, we document that four CSR dimensions (environment, community, employee relations, and product) out of six are positively related to firms’ survival probability. The positive association between CSR ratings and firm survival is stronger for firms operating in more competitive industries and those with weaker governance. We find that a firm’s engagement in CSR activities is particularly crucial for firm survival during pandemics and under adverse climate conditions. We establish causality in the relation between a firm’s CSR activities and its survival probability using instrumental variable (IV) and Heckman twostep analyses. Finally, we find that better financial performance, less stringent financial constraints, greater managerial discipline, and enhanced labor productivity are some of the channels through which firms engaging in more CSR activity achieve longer survival times.
    Keywords: Corporate Social Responsibility, Climate Change, Pandemic Uncertainty, Firm Survival, Corporate Governance
    JEL: G30 G41 M14
    Date: 2022–01–28
  2. By: Bircan, Çağatay; Saka, Orkun
    Abstract: We document a strong political cycle in bank credit and industry outcomes in Turkey. In line with theories of tactical redistribution, state-owned banks systematically adjust their lending around local elections compared with private banks in the same province based on electoral competition and political alignment of incumbent mayors. This effect only exists in corporate lending and creates credit constraints for firms in opposition areas, which suffer drops in assets, employment and sales but not firm entry. Financial resources and factors of production are misallocated as more efficient provinces and industries suffer the greatest constraints, reducing aggregate productivity.
    JEL: D72 D73 G21 P16
    Date: 2021–10–04
  3. By: David Haritone Shikumo; Oluoch Oluoch; Joshua Matanda Wepukhulu
    Abstract: A significant number of the non-financial firms listed at the Nairobi Securities Exchange have been experiencing declining financial performance and financial growth, which deter investors from investing in such firms. Hence, the study aimed at establishing the effect of financial structure on the financial growth of non-financial firms listed at the Nairobi Securities Exchange.
    Date: 2023–03
  4. By: Afzali, Aaron (Hanken School of Economics); Oxelheim, Lars (School of Business and Law, University of Agder, Norway); Randøy, Trond (School of Business and Law, University of Agder, Norway); Paulo Vieito, João (Polytechnic Institute of Viana do Castelo, School of Business Studies, Portugal)
    Abstract: In this study, we examine the relationship between within-firm pay inequality and employee productivity. We use hand-collected data on a sample of S&P 1500 companies from 2018-2022 and find a concave relationship between the relative CEO pay and employee productivity. Consistent with tournament theory, we show that the pay gap between the CEO and the Vice Presidents initially positively affects employee productivity. However, this positive effect only works up to a certain level, at which - as expressed by the CEO-employee pay ratio - employee discontent initiates a fall in firm-level productivity. We identify this tipping point as the point at which CEO pay exceeds the median worker’s pay by a factor of 40. The average CEO-employee pay ratio in our sample is 193:1, suggesting that most firms could have avoided a fall in productivity by reducing their CEO-employee pay ratio. Our results remain robust after controlling for endogeneity. From a public policy perspective, our findings pave the way for corporate self-regulation of CEO pay to avoid politically imposed hard laws.
    Keywords: CEO pay; CEO pay-employee ratio; Employee productivity; Tournament incentives
    JEL: G18 G32 G34 J24 J33 M12
    Date: 2023–04–05
  5. By: Charlotte Emlinger (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Karine Latouche (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement)
    Abstract: The objective of this paper is to estimate the impact of the inclusion of GIs in bilateral agreements on French exports of foodstuffs. To do so, we rely on a unique dataset of firms and products concerned by Geographical Indications (GIs) in the French agri-food industry (excluding wine) for 2012-2017, merged with firm-product level data from French Customs and French National Institute of Statistics. Controlling for markets and firms characteristics, we exploit the time dimension of the agreements and compare GI firms exports before and after the signature of the 13 agreements (25 destination countries) which include GI list to protect. We explore both the impact of the agreements on the probability of firms to export (the extensive margin of trade), their exports in value and quantity (the intensive margin) and their price. We also consider the heterogeneous impact of agreements according to the kind of products (cheese, meat, other), the size of firms and destination characteristics (existence of similar geographical indications for domestic products).
    Keywords: Bilateral trade agreements, Firm level data, Export performance, Trade margins
    Date: 2023–01–12
  6. By: Matthew Ackman; Timothy Grieder; Callie Symmers; Geneviève Vallée
    Abstract: We analyze the financial statements and stock prices of publicly traded firms incorporated in Canada that report greenhouse gas emissions. We find that these firms primarily use equity financing. We also find that equity investors increasingly account for firms’ emissions when making investment decisions but the impact appears small. This suggests that assets exposed to climate change remain at risk of a sudden repricing.
    Keywords: Asset pricing; Climate change; Financial stability; Firm dynamics
    JEL: G G1 G3 Q Q5
    Date: 2023–04
  7. By: Esther Ann Bøler; Andreas Moxnes; Karen Helene Ulltveit-Moe
    Abstract: This paper makes use of a reform that allowed firms to use patents as stand-alone collateral, to estimate the magnitude of collateral constraints and to quantify the aggregate impact of these constraints on misallocation and productivity. Using matched firm-bank data for Norway, we find that bank borrowing increased for firms affected by the reform relative to the control group. We also find an increase in the capital stock, employment and innovation as well as equity funding. We interpret the results through the lens of a model of monopolistic competition with potentially collateral constrained heterogeneous firms. Parameterizing the model using well-identified moments from the reduced form exercise, we find quantitatively large gains in output per worker in the sectors in the economy dominated by constrained (and intangible-intensive) firms. The gains are primarily driven by capital deepening, whereas within-industry misallocation plays a smaller role.
    Keywords: intangible capital, patents, credit constraints, misallocation, productivity
    JEL: D25 G32 L25 L26 O34 O47
    Date: 2023

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