nep-bec New Economics Papers
on Business Economics
Issue of 2023‒06‒26
six papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Ethnic diversity and firm performance: Evidence from India By Sefa Awaworyi Churchill; Yeti Nisha Madhoo; Shyam Nath
  2. The market for CEOs By Cziraki, Peter; Jenter, Dirk
  3. Who is to suffer? Quantifying the impact of sanctions on German firms By Görg, Holger; Jacobs, Anna; Meuchelböck, Saskia
  4. Production and Ownership Networks By CHEN Cheng; SUN Chang; ZHANG Hongyong
  5. Progress of Digitalization and Industrial Revitalization: Employment and productivity dynamics of firms in Japan (Japanese) By IKEUCHI Kenta; ITO Keiko; KIM Younggak; KWON Hyeog Ug

  1. By: Sefa Awaworyi Churchill; Yeti Nisha Madhoo; Shyam Nath
    Abstract: We examine if the financial performance of firms in India depends on the level of ethnic diversity in the state or district in which they operate. Thus, using data on 1, 199 listed firms in the materials, industrial and infirmation technology sectors in India, we examine the impact of ethnic diversity on various measures of firm financial performance. Based on indices of fractionalization calculated for 15 states and 74 districts in which these firms operate, we find evidence of negative effects of ethnic diversity on firm performance. These results are robust to endogeneity and alternative ways of measuring diversity.
    Keywords: Environmental governance; fiscal decentralization; atmospheric pollution; spillover effects; non-point source pollution; India
    JEL: J15 L25
    Date: 2022
  2. By: Cziraki, Peter; Jenter, Dirk
    Abstract: We study the market for CEOs of large publicly-traded US firms, analyze new CEOs' prior connections to the hiring firm, and explore how hiring choices are determined. Firms are hiring from a surprisingly small pool of candidates. More than 80% of new CEOs are insiders, defined as current or former employees or board members. Boards are already familiar with more than 90% of new CEOs, as they are either insiders or executives who directors have previously worked with. There are few reallocations of CEOs across firms - firms raid CEOs of other firms in only 3% of cases. Pay differences appear too small to explain these hiring choices. The evidence suggests that firm-specific human capital, asymmetric information, and other frictions have first-order effects on the assignment of CEOs to firms.
    Keywords: CEO labor markets; CEO-firm matching; assignment models; CEO turnover; CEO compensation
    JEL: G30 G34 M12
    Date: 2021–06–14
  3. By: Görg, Holger; Jacobs, Anna; Meuchelböck, Saskia
    Abstract: In this paper, we use a novel firm level dataset for Germany to investigate the effect of sanctions on export behaviour and performance of German firms. More specifically, we study the sanctions imposed by the EU against Russia in 2014 in response to the annexation of Crimea and Russia's countermeasures. We find a substantial negative effect on both the extensive and intensive margin of German exports. While the negative effects are strongest for firms exporting products subject to trade restrictions, we provide further evidence on the indirect effects of sanctions. Analysing the impact on broader measures of firm performance, we document that the cost of sanctions is heterogeneous across firms but overall modest. Our results reveal that the negative impact of the shock was concentrated primarily among a small number of firms that were highly dependent on Russia as an export market and those directly affected by the sanctions.
    Keywords: sanctions, foreign policy, trade, firm behaviour, Germany
    JEL: F1 F14 F51 L25
    Date: 2023
  4. By: CHEN Cheng; SUN Chang; ZHANG Hongyong
    Abstract: Using data on both buyer-supplier and owner-subsidiary links between Japanese firms, we characterize the interconnection between production and ownership networks. In the cross-section, we find that the majority of the owner-subsidiary links are also buyer-supplier links, thus highlighting the role of goods or services transactions in vertical integration. In addition, we find that firms are more likely to engage with buyers/suppliers that have already been used by related parties, thereby suggesting an indirect benefit of integration. Finally, we show evidence that more capable firms are more likely to integrate buyers/suppliers conditional on the number of buyers/suppliers. As firms grow, however, they rely less on related buyers/suppliers and more on unrelated ones.
    Date: 2023–06
  5. By: IKEUCHI Kenta; ITO Keiko; KIM Younggak; KWON Hyeog Ug
    Abstract: Entry and exit of firms and changes in employment and productivity are expected to bring about an increase in national economic growth and productivity. However, there is concern that the increasing importance of digital technology with its network externalities will make it more difficult for new firms to grow and overcome the advantages of incumbents, widening the productivity gap among firms. On the other hand, in industries where new technologies, such as digital technologies, are advancing rapidly, it is possible that there will be increasing activity of new firms entering and exiting the market. In this paper, we measure the entry and exit, job creation and destruction, and inter-firm productivity gap within each industry in Japan and discuss the relationship between the progress of digitalization and the metabolism within industries, comparing results with those of European countries. Unlike the results for European countries, the intensity of intangible assets, including digital assets, did not increase substantially in Japan, nor did the productivity gap between firms within industries increase significantly. By examining the differences from European countries, we explore the factors behind Japan's sluggish productivity growth.
    Date: 2023–06
  6. By: Masagus M. Ridhwan (Bank Indonesia); Rizki Nauli Siregar (University of Mainz); Jahen F. Rezki (University of Indonesia)
    Abstract: Countries currently face two big trends, especially in the manufacturing sector: premature deindustrialization and the prevalence of superstar firms. In this paper, we document and characterize firm heterogeneity in a developing economy context, using Indonesia from 2005 to 2015 as context. We show the importance of large firms in shaping aggregate outcomes in the manufacturing sector. Furthermore, we confirm that productivity growth increases domestic market shares and profit by increasing the power to exert mark-up and reducing labor shares. We also show the importance of international trade engagement by superstar firms. We show new insights on superstar firms that do not necessarily have higher mark-up rates than others. The policy implication from this study is efforts to boost superstar firms in Indonesia will be paramount, especially policies to increase firms’ size and promoting exports.
    Keywords: Manufacture, Superstar Firms, Firm Heterogeneity, Indonesia
    JEL: L11 O11 O33 O43 D42
    Date: 2022

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