nep-bec New Economics Papers
on Business Economics
Issue of 2023‒05‒01
six papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Was Robert Gibrat right? A test based on the graphical model methodology By Marco Guerzoni; Luigi Riso; Marco Vivarelli
  2. Search and Performance in Ecosystems: The Changing Role of Product Architectures By Axel Zeijen; Luigi Marengo; Stefano Brusoni
  3. Who shall succeed? An examination of manager overconfidence and CEO selection By Lin Li; Wilson H S Tong
  4. The Information Content from Lending Relationships Across the Supply Chain By Theo Cotrim Martins; Rafael Schiozer; Fernando de Menezes Linardi
  5. Did Job Retention Schemes Save Jobs during the Covid-19 Pandemic? Firm-level Evidence from Latvia By Konstantins Benkovskis; Olegs Tkacevs; Karlis Vilerts
  6. Understanding climate-related disclosures of UK financial institutions By Acosta-Smith, Jonathan; Guin, Benjamin; Salgado-Moreno, Mauricio; Vo, Quynh-Anh

  1. By: Marco Guerzoni (DEMS, Università di Milano-Bicocca, Milano, Italy - BETA, University of Strasbourg, France); Luigi Riso (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore, Milano, Italy); Marco Vivarelli (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore, Milano, Italy – UNU-MERIT, Maastricht, The Netherlands – IZA, Bonn, Germany)
    Abstract: Using both regression analysis and an unsupervised graphical model approach (never applied before to this issue), we confirm the rejection of the Gibrat’s law when our firm-level data are considered over the entire investigated period, while the opposite is true when we allow for market selection. Indeed, the growth behavior of the re-shaped (smaller) population of the survived most efficient firms is in line with the Law of Proportionate Effect; this evidence reconciles early and current literature testing Gibrat’s law and may have interesting implications in terms of both applied and theoretical research.
    Keywords: Gibrat’s Law, firm survival, market selection, firm growth
    JEL: L11
    Date: 2023–03
  2. By: Axel Zeijen; Luigi Marengo; Stefano Brusoni
    Abstract: A crucial assumption in organization theory is that product architectures form a stable basis on which firms make strategic choices, over a period of time. However, emerging digital technologies challenge this idea, by allowing firms to redesign architectures at will. In this paper, we explore this novel phenomenon, its effects, and its theoretical implications. We develop an NK model suitable for studying (i) variable interdependence structures between components and (ii) the dynamics of search and adaptation in ecosystems. We find that the possibility to redesign product architectures undercuts the stability on which vertical relationships are based. We distinguish two pathways through which firms can benefit from redesigning product architectures: by enhancing the fitness landscape (landscape redesigns) or by altering the conditions on which inter-firm coordination is based (ecosystem redesigns). The availability of these two pathways depends on a firm's positioning (vertical scope and location in the value chain). Our results shed light on the changing role of interdependence structures in ecosystems, the differential advantages of integration and specialization strategies, and the effects of digital technologies in both technical and organizational domains.
    Keywords: Digital technologies; ecosystems; firms' boundaries.
    Date: 2023–04–13
  3. By: Lin Li (Shenzhen Audencia Business School, Shenzhen University); Wilson H S Tong
    Abstract: By categorizing managerial confidence attributes into overconfidence, rationality and diffidence with the methodology used in the finance literature, we investigate how company boards strategically select chief executive officer (CEO) replacements from the senior management pool with different confidence attributes. In normal retirements, company boards tend to select succeeding managers with the same confidence attribute as retiring CEOs. If boards fire company CEOs, they tend to select rational successors irrespective of the confidence attributes of the ousted CEOs. Such board inclination of picking rational successors also occurs when corporate operation is at the recession stage or corporate strategy is changed surrounding succession. The evidence indicates that the managerial confidence attribute is an important consideration of the board in the CEO selection process and that the board deliberately selects the CEO with a certain attribute to move the firm in a planned direction.
    Keywords: CEO selection, corporate strategy, operation status, overconfidence, Overconfidence CEO selection Corporate strategy Operation status G3 G34 G39, Overconfidence, Corporate strategy, Operation status G3, G34, G39
    Date: 2022–11–15
  4. By: Theo Cotrim Martins; Rafael Schiozer; Fernando de Menezes Linardi
    Abstract: Using unique administrative data on firm-to-firm payments and bank-to-firm lending, we investigate how lending to a firm is affected by same-bank lending to the firm’s customers and suppliers. We show that bank lending increases when the same bank also lends to the firm’s customers or suppliers. Additionally, we find that the revelation of negative information about the creditworthiness of a firm’s major customer causes an increase in the cost and a reduction in the duration of the loans provided to the firm. These results suggest that lending to firms connected through the supply chain conveys valuable information to banks.
    Date: 2023–03
  5. By: Konstantins Benkovskis (Latvijas Banka); Olegs Tkacevs (Latvijas Banka); Karlis Vilerts (Latvijas Banka)
    Abstract: This paper studies the employment effect of the job retention scheme implemented during the Covid-19 pandemic. Using firm-level data from Latvia, we investigate whether a change in the number of employees in firms that received support from the job retention programme has been different from that of similar firms which did not receive such support, and whether these differences have disappeared over time. We find strong evidence that job retention scheme participants in Latvia were less likely to cut employment and that this effect persisted for several months after receiving support. Participation in the job retention scheme affected both the likelihood of a firm’s survival and the rate at which employees were laid off. Our results also suggest that the participation effect was not uniform across firms, with the effect being less pronounced in service sectors with a higher level of contact intensity and more pronounced in sectors with a higher proportion of highly skilled employees.
    Keywords: Job retention schemes, idle-time allowance, Covid-19, employment
    JEL: E24 H12 J62 J68
    Date: 2023–04–11
  6. By: Acosta-Smith, Jonathan (Bank of England); Guin, Benjamin (Bank of England); Salgado-Moreno, Mauricio (Bank of England); Vo, Quynh-Anh (Bank of England)
    Abstract: Climate-related disclosures reduce information asymmetries between firms and investors and help transition to a net zero economy. However, disclosure practices might differ across firms. We explore the determinants of firm disclosures by creating a unique, firm-level panel data set on climate-related disclosures of UK financial institutions. To that end, we apply Natural Language Processing techniques with Machine Learning classifiers on unique textual data which we hand-collected from their published reports. We document differences in disclosure levels across financial institutions with different sizes and over time. We show that climate‑related policy communications in the form of regulatory guidance on future mandatory disclosures is associated with a catch-up by firms previously disclosing less.
    Keywords: Climate-related disclosures; market discipline; Task Force on Climate-Related Financial Disclosures (TCFD) and Natural Language Processing (NLP).
    JEL: C40 C80 G20
    Date: 2023–03–10

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