nep-bec New Economics Papers
on Business Economics
Issue of 2023‒10‒09
nine papers chosen by
Vasileios Bougioukos, London South Bank University

  1. Declining business dynamism in Europe: The role of shocks, market power, and technology By Biondi, Filippo; Inferrera, Sergio; Mertens, Matthias; Miranda, Javier
  2. Label to match - Firms’ signaling decisions when not everyone cares By Fritz, Qi Gao
  3. Loan Recoveries and the Financing of Zombie Firms over the Business Cycle By Asli Demirgüç-Kunt; Bálint Horváth; Harry Huizinga
  4. Resource Misallocation in the Presence of R&D Spillovers By Li, Kun; Azacis, Helmuts; Luintel, Kul B
  5. Does corporate environmentalism affect corporate insolvency risk? The role of market power and competitive intensity By Saqib Aziz; Mahabubur Rahman; Dildar Hussain; Duc Nguyen
  6. Common Firm-level Investor Fears: Evidence from Equity Options By Jozef Barunik; Mattia Bevilacqua; Michael Ellington
  7. CEO Gender Bias in the Formation of Firm-to-Firm Transactions By Yutaro Izumi; Hitoshi Shigeoka; Masayuki Yagasaki
  8. The Dynamics and Spillovers of Management Interventions: A Comment on Bianchi and Giorcelli (2022) By Lima, Gonçalo; Moeller, Jakob; Schmandt, Marco; Westheide, Christian
  9. The Gender Pay Gap: Micro Sources and Macro Consequences By Iacopo Morchio; Christian Moser

  1. By: Biondi, Filippo; Inferrera, Sergio; Mertens, Matthias; Miranda, Javier
    Abstract: We study the changing patterns of business dynamism in Europe after 2000 using novel micro-aggregated data that we collect for 19 European countries. In all of them, we document a decline in job reallocation rates that concerns most economic sectors. This is mainly driven by dynamics within sectors, size classes, and age classes rather than by compositional changes. Large and mature firms show the strongest decline in job reallocation rates. Simultaneously, the shares of employment and sales of young firms decline. Consistent with US evidence, firms' employment changes have become less responsive to productivity. However, the dispersion of firms' productivity shocks has decreased too. To enhance our understanding of these patterns, we derive a firm-level framework that relates changes in firms' productivity, market power, and technology to job reallocation and firms' responsiveness.
    Keywords: business dynamism, European cross-country data, market power, productivity, responsiveness of labor demand
    JEL: D24 J21 J23 J42 L11 L25
    Date: 2023
  2. By: Fritz, Qi Gao
    Abstract: In this paper, I propose a model to investigate firms’ signaling decisions on the product level. By seeking (imperfect) third-party certification, firms can label their products with good quality for which only some consumers care. Combining the signaling game with a matching problem, I am able to investigate the impact of the size of conscious consumers and asymmetric firm size on firms’ signaling decisions. In general, the level of certification costs determines the occurrence of different equilibria. While more conscious buyers unambiguously increase the probability of separating and semi-separating equilibria, the effect on the pooling equilibrium is not that straightforward. Asymmetric firm size negatively influences the occurrences of all equilibria. However, product allocation schemes play an important role in such negative effects.
    Date: 2023–09–04
  3. By: Asli Demirgüç-Kunt (Center for Global Development); Bálint Horváth (University of Arizona); Harry Huizinga (Tilburg University and CEPR)
    Abstract: Using new data from the European Banking Authority on loan recovery outcomes, we examine how variation in loan recovery efficiency affects the transmission of financial sector and overall economic weakness to firm-level financial and real outcomes. We find that firms linked to under-capitalized banks experience higher debt, employment, and sales growth rates, if they are located in countries with less efficient loan recoveries. Furthermore, during economic downturns zombie firms—insolvent firms that continue to receive credit—achieve higher debt, employment, and sales growth, and fewer defaults if they are resident in such countries. Overall, we find that less efficient loan enforcement mitigates the transmission of financial sector and economic weakness to firm-level outcomes. This stabilizing effect, however, is likely to come at the cost of significant distortions documented in earlier literature.
    Keywords: loan recovery, zombie firm, business cycle
    JEL: E32 G21
    Date: 2023–09–22
  4. By: Li, Kun (Cardiff Business School); Azacis, Helmuts (Cardiff Business School); Luintel, Kul B (Cardiff Business School)
    Abstract: We study resource misallocation by explicitly modelling R&D input and knowledge spillovers. The effects of R&D and spillovers on firm-level productivity are extensively studied in applied work, but not in the context of resource misallocation. We establish that, in the presence of spillovers, efficient resource allocation requires that more productive firms face higher R&D input prices. Analysing UK firm-level data, we find that the output gains from correcting misallocation are greatly overestimated when spillovers are ignored. Output losses due to capital distortions dominate those from labour and R&D inputs. Adopting a wrong R&D policy could lead to significant output losses.
    Keywords: resource misallocation, productivity, R&D spillover, the UK manufacturing firms
    JEL: D24 D61 O30 O47
    Date: 2023–09
  5. By: Saqib Aziz (ESC [Rennes] - ESC Rennes School of Business); Mahabubur Rahman (ESC [Rennes] - ESC Rennes School of Business); Dildar Hussain (ESC [Rennes] - ESC Rennes School of Business); Duc Nguyen (IPAG Business School, VNU - Vietnam National University [Hanoï])
    Abstract: Little is known about the effects of green performance on corporate insolvency risk. This study examines the relationship between green performance and firm insolvency risk from both theoretical and empirical perspectives. Using a panel of 179 US firms included in the Newsweek Green Rankings and a system generalised method of moments estimation which generates endogeneity-robust regression coefficients, we found that firms with higher green performance are at lower risk of insolvency. We further postulate and provide theory-based empirical evidence that the nexus between green performance and insolvency risk is contingent upon other internal and external boundary conditions. Specifically, this research documents that the nexus between green performance and firm insolvency risk is moderated by market power as well as industry competitive intensity. The results of this study are robust across several sensitivity analyses.
    Keywords: Green performance, Insolvency risk, Market share, Industry competitiveness, Z-score
    Date: 2021–11
  6. By: Jozef Barunik; Mattia Bevilacqua; Michael Ellington
    Abstract: We identify a new type of risk, common firm-level investor fears, from commonalities within the cross-sectional distribution of individual stock options. We define firm-level fears that link with upward price movements as good fears, and those relating to downward price movements as bad fears. Such information is different to market fears that we extract from index options. Stocks with high sensitivities to common firm-level investor fears earn lower returns, with investors demanding a higher compensation for exposure to common bad fears relative to common good fears. Risk premium estimates for common bad fears range from -5.63% to -4.92% per annum.
    Date: 2023–09
  7. By: Yutaro Izumi; Hitoshi Shigeoka; Masayuki Yagasaki
    Abstract: While female CEOs are under-represented, the barriers they face in the business environment remain poorly understood. This study investigates the influence of gender bias in forming CEOs’ business networks. Using transaction data of 1 million Japanese firms, we find that CEOs of the same gender significantly trade more than those of the opposite gender, mostly driven by small- and medium-sized firms in which CEOs presumably have a strong involvement in transactions. As most CEOs are male, such same-gender bias reduces the trading opportunities for females relative to male CEOs. Regarding mechanisms, our survey reveals both the existence of barriers that impede male CEOs from becoming acquainted with female CEOs and the tendency for male CEOs to prefer interacting with male CEOs over female CEOs.
    JEL: D22 J16
    Date: 2023–08
  8. By: Lima, Gonçalo; Moeller, Jakob; Schmandt, Marco; Westheide, Christian
    Abstract: Bianchi and Giorcelli (2022) study the long-term and spillover effects of a management intervention program on firm performance in the US, between 1940 and 1945. The authors find that the Training Within Industry (TWI) program led to positive effects which lasted for at least 10 years. Firm sales of treated firms increasedd by 5.3% in the first year after implementation, peaking at 21.7% after 8 years, before reducing to 16% gains after a decade. The authors claim that the program generated long-lasting changes in man- agerial practices. Finally, the program also led to positive spillover effects on the supply chain of treated firms. First, we reproduce the paper's main findings. Second, we test the ro- bustness of the results to (1) changing the main specification sample and (2) testing other difference-in-differences estimators, using the same data, pro- vided by the authors. We find that the results are robust to these changes. All point estimates in the study remain statistically significant and of similar magnitude. While the paper's finding reproduce and replicate, challenges in reproduc- ing results we encountered lead us to recommend improvements to journals' code policies.
    Date: 2023
  9. By: Iacopo Morchio; Christian Moser
    Abstract: Using linked employer-employee data from Brazil, we document a large gender pay gap due to women working at lower-paying employers with better amenities. To interpret these facts, we develop an equilibrium search model with endogenous firm pay, amenities, and employment. We provide a constructive proof of identification of all model parameters. The estimated model suggests that amenities are important for men and women, that compensating differentials explain half of the gender pay gap, and that there are significant output and welfare gains from eliminating gender differences. However, equal-treatment policies fail to achieve those gains.
    Keywords: Monopsony; Amenities; Earnings inequality; Linked employer-employee data; Equilibrium search model; Taste-based discrimination; Worker and firm heterogeneity; Compensating differentials
    JEL: J16 J32 E24 J31
    Date: 2023–09–06

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