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on Business Economics |
| By: | Pascal Nguyen; Nahid Rahman (Finance Discipline Group, UTS Business School, University of Technology, Sydney); Alex Tong; Ruoyun Zhao (Finance Discipline Group, UTS Business School, University of Technology, Sydney) |
| Abstract: | We study the effect of board size on firm value in Australia. Using a large sample of Australian firms over the period 2001-2011, we find strong evidence of a negative relationship. We show that firms with a large board are associated with CEO compensation that is sensitive to firm size, but not to firm performance. This incentive to accumulate assets is congruent with the fact that firms with a large board also exhibit lower operating performance and higher operating costs. Furthermore, we find that the effect of board size is stronger in small firms. This result might explain why earlier studies, which focused on large Australian firms, found board size to have little impact on firm value. |
| Keywords: | board of directors; corporate governance; firm performance; CEO compensation |
| JEL: | G30 G31 G32 G34 |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:wpaper:182&r=bec |
| By: | Xubei Luo; Nong Zhu |
| Abstract: | The Chinese economy has witnessed impressive development since the enterprise reforms in the 1990s. With the restructuring of the private sector and the development of market economy, the level and volatility of firm level productivity have become increasingly important aspects of the micro performance of the economy. This paper examines the role of different firm characteristics - such as size, age, ownership, and geographic location - in productivity volatility using a firm-level dataset collected annually by China’s National Bureau of Statistics in 1998-2007. It follows the methodology developed in Comin and Philippon (2005; 2007) to measure firm productivity volatility as the standard deviation of the annual growth rate of output per worker. Its objectives are to investigate the drivers of productivity volatility of Chinese industrial firms, and to shed light on the sources of output volatility and its evolution over time. The results suggest that in general, firm productivity volatility declined over time. Among firms of different characteristics, larger firms, older firms, foreign firms, and firms located in the coastal provinces are less volatile. Firm size and location are the two major factors that drive changes in productivity volatility – one positively and one negatively. While the gaps of volatility between smaller firms and larger firms declined, the gaps between firms located in the coastal provinces and inland provinces increased. |
| Keywords: | Enterprise reform, productivity, volatility, China, |
| JEL: | C21 D21 E23 |
| Date: | 2015–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2015s-32&r=bec |
| By: | Yi Zhou; Canfei He; Shengjun Zhu |
| Abstract: | Creative destruction is a key driving force behind industrial development. The continuing process of creative destruction provides an impetus to regional industrial renewal. Our analytical framework that emphasizes the ways in which firm exit creates a stimulus for firm entry, resulting in incremental innovation and productivity increase is complementary to the process of technological change and industrial renewal articulated by Schumpeter who pays attention to how new entrants bring in radical innovation and new products, making incumbents’ products and technologies obsolete and force them to exit or catch up. Using firm-level data of China’s industries during 1998-2008, this paper seeks to argue that the articulation between firm exit and entry has been constantly shaped by an assemblage of various factors, including firm characteristics, industrial linkages, regional institutions and geographical proximity. |
| Keywords: | Creative destruction, Firm Exit, Firm Entry, Industrial Dynamics, China |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1522&r=bec |
| By: | Kira Pauka (University of Basel) |
| Abstract: | This paper analyzes how part-time work affects financial and innovative firm performance. Moreover, it provides a detailed examination of part-time work by defining three different forms of part-time work (large, medium and small part-time work) depending on weekly working hours. Considering human capital theory, I expect part-time workers to have lower work experience and to accumulate less human capital. Thus I hypothesize that part-time work affects both, financial and innovative firm performance, negatively. For the empirical investigation I use a large German firm-level data set. The analysis shows that increasing part-time work has a significant negative impact on financial firm performance. Specifically, there are differences with regard to the considered categories of part-time work. Part-time workers having the fewest working hours per week have the strongest negative impact on financial firm performance. However the negative effect of part-time work does not remain for innovative firm performance. The results show no significant difference between part-time and full-time workers in their impact on innovative firm performance. |
| Keywords: | part-time work, financial firm performance, innovation |
| JEL: | J21 L25 M50 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bsl:wpaper:2015/05&r=bec |
| By: | Melitz, Marc J.; Polanec, Sašo |
| Abstract: | In this paper, we propose an extension of the productivity decomposition method developed by Olley & Pakes (1996). This extension provides an accounting for the contributions of both firm entry and exit to aggregate productivity changes. It breaks down the contribution of surviving firms into a component accounting for changes in the firm-level distribution of productivity and another accounting for market share reallocations among those firms - following the same methodology as the one proposed by Olley & Pakes (1996). We argue that the other decompositions that break-down aggregate productivity changes into these same four components introduce some biases in the measurement of the contributions of entry and exit. We apply our proposed decomposition to the large measured increases of productivity in Slovenian manufacturing during the 1995-2000 period and contrast our results with those of other decompositions. We find that, over a 5-year period, the measurement bias associated with entry and exit is substantial, accounting for up to 10 percentage points of aggregate productivity growth. We also find that market share reallocations among surviving firms played a much more important role in driving aggregate productivity changes. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:hrv:faseco:17492204&r=bec |
| By: | Dalia Marin; Jan Schymik; Jan Tscheke |
| Abstract: | What explains Germanyâ??s superb export performance? Is Germanyâ??s export behaviour very distinct compared to other European countries? The authors explore the organisational responses to competition of 14,000 exporting firms in seven European countries. The paper examines the export business model of the median exporter and of the top one percent exporters in each country, accounting for 20 percent to 55 percent of total exports. What do these firms do to become superstars? The authors find, first, that the export market share of the median exporter in each of the countries to the world more than tripled (in some cases the export market share increases tenfold) for firms that combine decentralised management with offshoring of production to low-wage countries. Exporters which abstain from any organisational adjustment do very badly. Decentralised management provides incentives for workers for product improvements allowing exporters to compete on quality. Offshoring production to low-wage countries reduces costs allowing exporters to compete on price. Second, we find that Germany is the leading quality exporter in Europe followed by Austria and Spain. Among the top 10 percent of exporters there is no single firm with low quality in Germany and Austria, which suggest that decentralised management has provided incentives for quality in these countries. Third, Germanyâ??s exports are less vulnerable to price increases, while exports from France and Italy respond strongly to price changes, and thus costs reductions via offshoring benefits these countries most. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:889&r=bec |
| By: | Robert Ulbricht (Toulouse School of Economics); Ludwig Straub (MIT) |
| Abstract: | This paper examines the relationship between uncertainty and financial crises. In particular, we present a model where the amount of funding a firm receives depends on how financial markets assess the firm's business conditions. Financial agents endogenously learn about a firm's business conditions from local business indicators, but financial constraints impair the usefulness of this information when a firm is short of funds. This is because financially constrained firms respond less to their private information, reducing the informativeness of business indicators. As a result, a temporary aggregate shock to the economy's financial capacity causes a persistent cycle of uncertainty and financial constraints, where financial markets grow increasingly uncertain about firms without funding. While this feedback loop bears little effect on firms with access to funds, the severe effects it has on constrained firms generate a deep and long-lasting aggregate recession, characterized by an increased misallocation of credit, an increased cross-sectional dispersion of output across firms, and highly volatile and pessimistic financial markets. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:199&r=bec |
| By: | L. Chauvet; H. Ehrhart |
| Abstract: | This paper explores the impact of foreign aid on firm growth for a panel of 4,342 firms in 29 developing countries, 11 of which are in Africa. Using the World Bank Enterprise Surveys data and controlling for firm fixed effects, we find a positive impact of foreign aid on firms' sales growth. This result is robust to several checks, notably to the instrumentation of aid and to estimations on various sub-samples. We then provide evidence that the positive effect of aid is especially strong for firms operating in sectors that are intensive in infrastructure and external finance, suggesting that aid may improve firm performance through the alleviation of infrastructure and financing constraints in developing countries. |
| Keywords: | Foreign aid. Firm growth. Infrastructure constraint. Financing constraint |
| JEL: | F35 O16 O50 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:563&r=bec |
| By: | FU Jiangtao; SHIMAMOTO Daichi; TODO Yasuyuki |
| Abstract: | Using unique firm-level data for manufacturing sectors in Indonesia, we examine how political and economic connections of firms affect their access to finance. We identify the political connections of a particular firm by whether the government owns its shares, whether politicians are on its board of directors, and whether its highly-ranked manager knows any politician personally. We find that politically connected firms are more likely to be able to borrow from state-owned banks. Moreover, being connected to the government raises the probability of being able to borrow as much as needed without any credit constraint. The financial benefit from political connections is more prominent for small and medium enterprises (SMEs) than for large firms. Furthermore, the benefit mostly comes from personal connections with politicians, rather than more formal connections as measured by government ownership or politicians on the boards of directors. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:15087&r=bec |
| By: | KATO Takao; KODAMA Naomi |
| Abstract: | Traditionally, Japanese firms are known for the use of a pay system which rewards their workers for long-term skill development through on-the-job training within the firm. Changing its traditional reward system to performance-related pay (PRP) which ties pay to shorter-term performance is one of the most often-discussed topics concerning Japan's human resource management (HRM) policies/practices in the last two decades or so. Proponents of the change urge Japanese firms to abandon their traditional reward system and adopt PRP in order to boost productivity and maintain/regain global competitiveness. Opponents question their underlying premise that PRP boosts enterprise productivity. The controversy has not been resolved in large part due to the lack of rigorous evidence on the productivity effect of PRP in Japan. In this paper, we provide such evidence by estimating production functions augmented by PRP, using unique firm-level panel data. Unlike prior studies that use cross-sectional data, we are able to estimate fixed effect models and hence identify the productivity effect of PRP separately from that of time-invariant unobserved firm characteristics such as corporate culture, tradition, and inherent managerial quality. Overall, we find no significant productivity effect of PRP, which tends to favor skeptics. However, we also find evidence that PRP does yield significant productivity gains for firms that no longer subscribe to the traditional "lifetime employment" practice; and for firms that use employee involvement and tap into local knowledge of frontline workers. As such, our findings point to the importance of HRM complementarity. Changing the traditional pay system to PRP without changing the rest of the traditional Japanese HRM system such as "lifetime employment" is ineffective. Likewise, it is futile to offer workers incentive (PRP) while neglecting to provide them with an opportunity to share their productivity-enhancing local knowledge (employee involvement). |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:15088&r=bec |
| By: | Ellul, Andrew; Pagano, Marco; Schivardi, Fabiano |
| Abstract: | We investigate the determinants of firms’ implicit employment and wage insurance to employees, using a difference-in-difference approach: we rely on differences between family and non-family firms to identify the supply of insurance, and exploit variation in unemployment insurance programs across and within countries to gauge workers’ demand for insurance. Using a firm-level panel from 41 countries, we find that family firms provide more stable employment than non-family ones, and in exchange they obtain both greater wage flexibility and lower labor cost: on average, their real wages are 5 percent lower, controlling for country, industry and time effects. The additional employment security provided by family firms is greater, and the wage discount larger, the less generous is public unemployment insurance: private and public provision of employment insurance appear to be substitutes. |
| Keywords: | family firms; insurance; risk-sharing; social security; unemployment; wages |
| JEL: | G31 G32 G38 H25 H26 M40 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10711&r=bec |
| By: | Jenny Gordon |
| Abstract: | Australia's recent productivity performance is reviewed and analysed, both in the overall economy and in selected sectors. Future prospects for productivity growth are examined. |
| Keywords: | Productivity growth, Australian productivity |
| JEL: | D24 J24 O47 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:eab:wpaper:24838&r=bec |
| By: | Jenny Gordon |
| Abstract: | Australia's recent productivity performance is reviewed and analysed, both in the overall economy and in selected sectors. Future prospects for productivity growth are examined. |
| Keywords: | Productivity growth, Australian productivity |
| JEL: | D24 J24 O47 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:eab:microe:24838&r=bec |
| By: | Cirera,Xavier; Lederman,Daniel; Máñez,J.A.; Rochina,M.E.; Sanchis,J.A. |
| Abstract: | This paper explores the link between exports and total factor productivity in Brazilian manufacturing firms over the period 2000?08. The Brazilian experience is instructive, as it is a case of an economy that expanded aggregate exports significantly, but with stagnant aggregate growth in total factor productivity. The paper first estimates firm-level total factor productivity under alternative assumptions (exogenous and endogenous law of motion for productivity) following a GMM procedure. In turn, the analysis uses stochastic dominance techniques to assess whether the ex ante most productive firms are those that start exporting (self-selection hypothesis). Finally, the paper tests whether exporting boosts firms? total factor productivity growth (learning-by-exporting hypothesis) using matching techniques to control for the possibility that selection into exports may not be a random process. The results confirm the self-selection hypothesis and show that starting to export yields additional growth in total factor productivity that emerges since the firm?s first year of exporting but lasts only one year. Further, this extra total factor productivity growth is much higher under the assumption of an endogenous law of motion for productivity, which reinforces the importance of accounting for firm export status to study the evolution of productivity. |
| Keywords: | E-Business,Economic Theory&Research,Labor Policies,Industrial Management,Knowledge for Development |
| Date: | 2015–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7365&r=bec |
| By: | Berardino Cesi (DEF, University of Rome "Tor Vergata"); Walter Ferrarese (DEDI, University of Rome "Tor Vergata") |
| Abstract: | We show that in an infinitely repeated Cournot game when firms adopt stick and carrot strategies exogenous horizontal mergers are profitable regardless the size of the merged entity. We characterize an equilibrium in which the new entity maximizes its discounted intertemporal profit under the constraint that each outsider produces just enough to be better off after the merger. Once the merger has occurred each insider gains more than each outsider, therefore the insider's dilemma is completely solved. |
| Keywords: | Insider's dilemma, horizontal mergers, repeated games, stick and carrot strategy |
| JEL: | L11 L12 |
| Date: | 2015–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:350&r=bec |
| By: | Lascaux, Alexander (Russian Presidential Academy of National Economy and Public Administration (RANEPA)) |
| Abstract: | Trusting relationships play a pivotal role in the structures of interfirm cooperation, particularly in the highly uncertain and complex technological environment characterized by frequent and radical innovations. The very fact of forging long-term cooperative relationships hinges upon a high level of trust development. Firms experience trust in competence, benevolence and integrity of their partners in interfirm economic exchanges, which makes it possible to maintain durable cooperative structures. |
| Keywords: | trusting relationships, interfirm cooperation, inter-firm alliances |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:ppaper:mn55&r=bec |