nep-bec New Economics Papers
on Business Economics
Issue of 2023‒06‒19
eleven papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Adoption of CEO Term Limit and Firm Performance (Japanese) By ISHIDA Souhei; SUZUKI Katsushi; NISHIMURA Yoichiro
  2. The Law of Proportionate Effect: A test based on the graphical model methodology By Marco Guerzoni; Luigi Riso; Marco Vivarelli
  3. Minimum wages, productivity, and reallocation By Hälbig, Mirja; Mertens, Matthias; Müller, Steffen
  4. Corporate taxes, productivity, and business dynamism By Andrea Colciago; Vivien Lewis; Branka Matyska
  5. Does speculative news hurt productivity? Evidence from takeover rumors By Andres, Christian; Bazhutov, Dmitry; Cumming, Douglas J.; Limbach, Peter
  6. Relational Skills and Corporate Productivity in a Comparative Size Class Perspective By Leonardo Becchetti; Sara Mancini; Nazaria Solferino
  7. Product Repositioning by Merging Firms By Enghin Atalay; Alan T. Sorensen; Christopher J. Sullivan; Wanjia Zhu
  8. The comparative advantage of firms By Boehm, Johannes; Dhingra, Swati; Morrow, John
  9. Financial Constraints and Firm Size: Micro-Evidence and Aggregate Implications By Miguel Ferreira; Timo Haber; Christian Rorig
  10. “Export Destination and Firm Upgrading: Evidence from Spain” By Akin A. Cilekoglu
  11. Modeling new-firm growth and survival with panel data using event magnitude regression By Frédéric Delmar; Jonas Wallin; Ahmed Maged Nofal

  1. By: ISHIDA Souhei; SUZUKI Katsushi; NISHIMURA Yoichiro
    Abstract: This study examines the determinants of the adoption of a term limit system, in which the tenure of the CEO is predetermined, and the impact of adopting the system on firm performance. Our results show that firms with more R&D investment, lower financial institutional shareholdings, and a greater number of educated CEO candidates are more likely to adopt the term-limit system. The relationship between the tenure system and firm performance is an inverted U-shaped for the non-term-limit firms, but no such relationship is found for the term limit firms. We find that the market value of firms that adopt the term limit is higher than that of firms that do not adopt the term limit in the years following CEO turnover, and that CEO turnover takes place before performance would have deteriorated due to the prolonged CEO tenure that would have occurred otherwise in the firms that adopt the term limit. These results are consistent with the idea that the term limit system is adopted in those firms with large disadvantages due to obsolescence of CEO capabilities, rigid strategies, and deteriorating corporate governance caused by long CEO tenure, as well as in those firms with small CEO turnover costs.
    Date: 2023–04
  2. By: Marco Guerzoni; Luigi Riso; Marco Vivarelli
    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
  3. By: Hälbig, Mirja; Mertens, Matthias; Müller, Steffen
    Abstract: We study the productivity effect of the German national minimum wage by applying administrative firm data. At the firm level, we confirm positive effects on wages and negative employment effects and document higher productivity even net of output price increases. We find higher wages but no employment effects at the level of aggregate industry × region cells. The minimum wage increased aggregate productivity in manufacturing. We do not find that employment reallocation across firms contributed to these aggregate productivity gains, nor do we find improvements in allocative efficiency. Instead, the productivity gains from the minimum wage result from within-firm productivity improvements only.
    Keywords: minimum wage, productivity, reallocation
    JEL: D24 J31 L11 L25
    Date: 2023
  4. By: Andrea Colciago; Vivien Lewis; Branka Matyska
    Abstract: We identify the effects of corporate income tax shocks on key US macroeconomic aggregates. In response to a corporate income tax cut, we find that: (i) labor productivity increases; (ii) entry increases with delay; (iii) exit increases; (iv) total labor increases by more than production labor. To rationalize these empirical findings, we build a New Keynesian model with idiosyncratic firm productivity, and entry and exit. Our model features productivity gains due to selection and cleansing along the entry and exit margins. Models with homogeneous firms fail to account for the selection and cleansing process and produce counterfactual results.
    Keywords: corporate taxation, productivity, firm entry and exit.
    JEL: E62 E32 H25
    Date: 2023–02
  5. By: Andres, Christian; Bazhutov, Dmitry; Cumming, Douglas J.; Limbach, Peter
    Abstract: Speculative news on corporate takeovers may hurt productivity because uncertainty and threat of job loss cause anxiety, distraction, and reduced collaboration and morale among employees and managers. Using a panel of OECD-headquartered firms, we show that firm productivity temporarily declines upon announcements of speculative takeover rumors that do not materialize. This productivity dip is more pronounced for targets and for firms in countries with weaker employee rights and less long-term orientation. Abnormal stock returns mirror these results. The evidence fosters our understanding of potential real effects of speculative financial news and the costs of takeover threats.
    Keywords: Distraction, Employee commitment, Employee rights, Fear of job loss, Productivity, Shareholder wealth, Takeover speculation, Distraction
    JEL: D24 G00 G34 J24
    Date: 2023
  6. By: Leonardo Becchetti (CEIS & DEF, University of Rome "Tor Vergata"); Sara Mancini (University of Rome "Tor Vergata"); Nazaria Solferino (Università della Calabria)
    Abstract: Based on results from the different fields of the game theoretic literature on strategic interactions and social dilemmas, gift exchange and procedural utility, we argue that corporate social responsibility and relational skills i) with other firms; ii) between employers and workers iii) among workers and iv) with stakeholders are associated to positive effects on productivity. We test our research hypothesis in a comparative perspective on small, medium and large sized Italian firms. We find that size matters when investigating the impact of relational skills on added value per worker after controlling for relevant concurring factors. The identified significant skill related components are: i) corporate policies considering strategic workers’ wellbeing; ii) team working attitudes considered as priority soft skills when hiring workers; iii) initiatives in favour of the productive network operating in the same local area; iv) involvement of stakeholders in CSR projects. Our findings show that the fourth component (stakeholder involvement) is positive and significant for all (small, medium and large) size classes, while the first (workers wellbeing) for small and medium firms, the second (team working) applies mainly to medium firms, and the third (initiative for the local productive network) to medium and large firms. Instrumental variable estimates on the relational skill principal component suggest that a causality link exists beyond these significant correlations. Our conclusion is that scale has an inverse U-shaped effect on the impact of team skills, weakens the impact of gift exchange mechanisms, while it reinforces those of investment in the local productive environment on added value per worker
    Keywords: social dilemma, gift exchange, procedural utility, corporate social responsibility, corporate size
    Date: 2023–05–29
  7. By: Enghin Atalay; Alan T. Sorensen; Christopher J. Sullivan; Wanjia Zhu
    Abstract: We examine merging firms' additions and removals of products for a sample of 66 mergers across a wide variety of consumer packaged goods markets. We find that mergers lead to a net reduction in the number of products offered by merging firms. Merging firms tend to both drop and add products at the periphery of their joint product portfolios, with the net effect of increasing within-firm product similarity. These results are consistent with theories of the firm that emphasize cost synergies among similar types of products or managerial core competencies linked to particular segments of the product market.
    JEL: L0 L1 L10 L13 L21 L22 L23 L25 L4 L40
    Date: 2023–05
  8. By: Boehm, Johannes; Dhingra, Swati; Morrow, John
    Abstract: Resource based theories propose that firms grow by diversifying into products which use common capabilities. We provide evidence for common input capabilities using a policy that removed entry barriers in input markets to show that the similarity of a firm’s and industry’s input mix determine firm production choices. We model industry choice and economies of scope from input capabilities. Estimating the model for Indian manufacturing, input complementarities make firms 5% more likely to produce in an industry and are quantitatively as important as time-invariant drivers of co-production rates. Upstream entry barriers were equivalent to a 9.5% tariff on inputs.
    Keywords: multiproduct firms; firm capabilities; vertical input linkages; comparative advantages; economies of scope; size-based policies; LSE - TISS - TATA Grant; Starting Grant 760037
    JEL: R14 J01 L81
    Date: 2022–12–01
  9. By: Miguel Ferreira; Timo Haber; Christian Rorig
    Abstract: Using a unique dataset covering the universe of Portuguese firms and their credit situation we show that financially constrained firms are found across the entire firmsize distribution, even in the top 1%. Incorporating a richer, empirically supported, productivity process into a standard heterogeneous firms model generates a joint distribution of size and credit constraints in line with the data. The presence of large constrained firms in the economy, together with their elevated capital share, explains about 66% of the response of output to a financial shock. We conclude by providing microevidence in support of themodel mechanism.
    Keywords: Firmsize; business cycle; financial accelerator
    JEL: E62 E22 E23
    Date: 2023–05
  10. By: Akin A. Cilekoglu (University of Barcelona)
    Abstract: This paper examines the role of export destinations on firm upgrading. I exploit the real effective exchange rate devaluation in Spain during the Great Recession to identify the unusual export performance of manufacturing firms. Using directly observable measures of firm upgrading, I find that increased share of exports to low-income destinations in sales reduced productivity and upgrading efforts of firms. However, real effective exchange rate devaluation did not affect the share of exports to high-income destinations in sales as well as productivity and upgrading efforts. The results are consistent with the quality sorting hypothesis that suggests a positive relationship between firm productivity and product quality. The findings in this paper emphasize that export market destination is an important determinant in analysing the gains from exporting.
    Keywords: Exports, Firm upgrading, Market destination, Exchange rate. JEL classification: D22, F14, O14, F31
    Date: 2023–05
  11. By: Frédéric Delmar (EM - emlyon business school); Jonas Wallin; Ahmed Maged Nofal
    Date: 2022–09

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