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on Business Economics |
| By: | Ivan DESEATNICOV; Konstantin KUCHERYAVYY |
| Abstract: | Why do aggregate foreign direct investments (FDI) fall with distance? To answer this question, we examine the behavior of Japanese multinational enterprises (MNEs). We are interested in FDI entry decision given export experience in foreign markets. We postulate that one of the firms' strategies is learning the foreign market potential by exporting first, followed by establishment of foreign affiliates if expected profitability is high enough. We propose a theoretical model and test it empirically using firm-level data from two basic surveys of Japanese companies: the Basic Survey of Japanese Business Structure and Activities and the Basic Survey on Overseas Business Activities for the period 1995-2013. We control for export experience and productivity of Japanese MNEs, and find that the probability of FDI entry decreases in distance. We conclude that trade costs shape outward FDI activity in addition to learning by exporting and productivity channels. Our tentative explanation suggests that trade costs limit firms' ability to reveal the foreign market demand. As a result, they may exit the foreign market before realizing the potential of profitability. |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:17036&r=bec |
| By: | Hoechle, Daniel; Karthaus, Larissa; Schmid, Markus |
| Abstract: | The literature on IPO long-term performance generally focuses on three- to five-year post-issue time horizons. Research published in the 2000s shows that the apparent underperformance of IPOs docu-mented in the 1990s disappears when the different risk exposures between IPO and mature firms are accounted for by using a Carhart (1997) factor model. In this paper, we show that a sample of 7,487 U.S. IPOs between 1975 and 2014 continues to significantly underperform mature firms in terms of Carhart-alphas over two years, with underperformance peaking one year after going public. We apply a regression-based portfolio sorts approach (RPS), which allows to decompose the Carhart-alpha into firm-specific characteristics, to explain one-year IPO underperformance using a multitude of market and firm characteristics in a statistically robust setting. In fact, our RPS-model that augments the Carhart factors by a set of firm characteristics related to investments, internationality, liquidity, and leverage can explain IPO underperformance. We find similar results when using the Fama-French three-factor model or an augmented version of the Carhart model. We challenge our RPS-model by applying it to the most severely underperforming sub-samples in terms of firm size, time period, venture capital involvement, and IPO underpricing, and find it to explain IPO underperformance across all sub-samples. |
| Keywords: | IPO Underperformance, Long-Term Performance Evaluation, Time Horizon, Firm Characteristics |
| JEL: | G14 G24 G32 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:usg:sfwpfi:2017:06&r=bec |
| By: | Persson, Lars |
| Abstract: | An increasingly large share of cross-border acquisitions are undertaken by private equity-firms (PE-firms) and not by traditional multinational enterprises (MNEs). We propose a model of cross-border acquisitions in which MNEs and PE-firms compete over domestic assets and which incorporates endogenous financial frictions. MNEs' advantages lie in firm-specific synergies and access to internal capital markets, whereas PE-firms are good at reorganizing target firms. We show that stronger firm-specific synergies, lower restructuring advantages for PE-firms, higher exit costs for PE-firms, better access to internal capital markets, a higher risk premium on lending, higher moral hazard problems, and higher trade costs all favor MNEs over PE-firms. We also present cross-country correlations that are consistent with these predictions. |
| Keywords: | Cross-border acquisitions; institutions; M&As; private equity; Trade |
| JEL: | F23 F65 L13 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11953&r=bec |
| By: | Horbach, Jens; Jacob, Jojo |
| Abstract: | "Up to now, the growing literature on the determinants of eco-innovation has not considered the influence of personal characteristics of the employees of a firm. The existing econometric analyses show much 'noise' explaining the driving forces of eco-innovation. The paper tries to open the 'black box' of unexplained heterogeneity. In fact, latent variables such as the greenness of a firm may be explained by the personal characteristics (gender, family status, geographical origin, education etc.) of the staff and the decision makers in a firm. The linked employer-employee database of the Institute for Employment Research (IAB) in Germany allows such an analysis based on data for 2010 and 2012. The results of an econometric analysis show that a high share of high qualified women and a mixed gender composition of the management board are positively correlated to eco-innovation activities. Furthermore, the results confirm that export-oriented firms are more likely to innovate, firms characterized by an over-aging of the staff innovate less and a higher competition pressure leads to more innovations." (Author's abstract, IAB-Doku) ((en)) |
| JEL: | C35 J16 Q55 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:201711&r=bec |
| By: | Ma, Jie; Wooton, Ian |
| Abstract: | We analyse a firm's investment decision in a regional economy composed of two countries. The firm already manufactures a horizontally differentiated good in the region and we determine the firm's equilibrium location choice for the new good and the welfare consequences of fiscal competition between the two countries. The outcome is the result of interactions among market-size, product-differentiation, and import-substitution effects. The first two effects represent the fundamental trade-off facing the firm. The third effect provides each country with an economic incentive to compete for the FDI. Past papers have addressed the market-size and import-substitution effects but, as far as we know, the product-differentiation effect is new to the literature. |
| Keywords: | FDI; import substitution; market size; MNEs; product differentiation |
| JEL: | F21 F23 L22 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11943&r=bec |
| By: | Nicholas Bloom; Erik Brynjolfsson; Lucia Foster; Ron Jarmin; Megha Patnaik; Itay Saporta-Eksten |
| Abstract: | Partnering with the Census we implement a new survey of “structured” management practices in 32,000 US manufacturing plants. We find an enormous dispersion of management practices across plants, with 40% of this variation across plants within the same firm. This management variation accounts for about a fifth of the spread of productivity, a similar fraction as that accounted for by R&D and twice as much as explained by IT. We find evidence for four “drivers” of management: competition, business environment, learning spillovers and human capital. Collectively, these drivers account for about a third of the dispersion of structured management practices. practices in 32,000 US manufacturing plants. We find an enormous dispersion of management practices across plants, with 40% of this variation across plants within the same firm. This management variation accounts for about a fifth of the spread of productivity, a similar fraction as that accounted for by R&D and twice as much as explained by IT. We find evidence for four “drivers” of management: competition, business environment, learning spillovers and human capital. Collectively, these drivers account for about a third of the dispersion of structured management practices. |
| Keywords: | Management, productivity, competition, learning |
| JEL: | L2 M2 O32 O33 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:17-32&r=bec |
| By: | Christian Brownlees; Robert Engle |
| Abstract: | We introduce SRISK to measure the systemic risk contribution of a financial firm. SRISK measures the capital shortfall of a firm conditional on a severe market decline, and is a function of its size, leverage and risk. We use the measure to study top US financial institutions in the recent financial crisis. SRISK delivers useful rankings of systemic institutions at various stages of the crisis and identifies Fannie Mae, Freddie Mac, Morgan Stanley, Bear Stearns and Lehman Brothers as top contributors as early as 2005-Q1. Moreover, aggregate SRISK provides early warning signals of distress in indicators of real activity. JEL Classification: C22, C23, C53, G01, G20Keywords: Systemic Risk Measurement, Great Financial Crisis, GARCH, DCC |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:srk:srkwps:201737&r=bec |
| By: | Victorien Barbet (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille 2 - Université Paul Cézanne - Aix-Marseille 3 - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Renaud Bourlès (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille 2 - Université Paul Cézanne - Aix-Marseille 3 - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Juliette Rouchier (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We study the dynamics of risk-sharing cooperatives among heterogeneous agents. Based of their knowledge on their risk exposure and the performance of the cooperatives, agents choose whether or not to remain in the risk-sharing agreement. We highlight the key role of other-regarding preferences, both altruism and inequality aversion, in stabilizing less segregated (and smaller) cooperatives. Limited knowledge and learning of own risk exposure also contributes to reducing segregation. Our finding shed light on the mechanisms behind risk-sharing agreements between agents heterogeneous in their risk exposure. |
| Keywords: | agent-Based,cooperative,risk-sharing,learning,altruism,other-regarding preferences |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01480539&r=bec |
| By: | Masayo Kani; Kazuyuki Motohashi |
| Abstract: | There has been growing interest in open innovation, where firms create value by combining internal and external ideas. Technology insourcing, however, has not been satisfactorily investigated in the empirical literature compared to technology outsourcing. In this paper, we examine the determinants of external technology sourcing by the type of counterpart in the new product development (NPD) process. We use a novel dataset at the product level, compiled by the Research Institute of Economy, Trade and Industry in 2011. We distinguish whether the technology partner is also a business partner, such as a supplier or customer. Our findings show that when the technology partner is not a business partner, patents play an important role in moderating the transaction costs in a partnership. On the other hand, when the technology partner is also a business partner, we find cospecialisation of technology and its complementary assets with the partner firm. |
| Keywords: | technology sourcing, co-specialisation, complementary assets, division of innovative labour |
| JEL: | D22 L22 O32 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:dp-2016-38&r=bec |
| By: | Grund, Christian (RWTH Aachen University); Hofmann, Tanja (RWTH Aachen University) |
| Abstract: | We explore the dispersion of bonus payments of managers within and between five large firms from the German chemical sector. We use data from a yearly salary survey in these firms during the observation period 2008 to 2013. Bonus payments account for 20 percent of base salaries on average. Both the amount and the dispersion of bonus-to-base ratios differ across firms. We disentangle the dispersion between and within the levels of firms' hierarchies. Revealed differences are consistent with differences in firms' value statements. |
| Keywords: | bonus payments, bonus to base rate, firm differences, pay policies, wage dispersion |
| JEL: | J31 J33 M52 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10642&r=bec |
| By: | Cao, Shutao; Leung, Danny |
| Abstract: | The degree to which financial constraints are binding is often not directly observable in commonly used business data sets (e.g., Compustat). In this paper, we measure and estimate the likelihood of a firm being constrained by external financing using a data set of small and medium-sized Canadian firms. Our measure separates the need for financing from the degree of being constrained, conditional on the need for financing. We find that firm size, the current debt-to-asset ratio and cash flow are robust indicators that can be used as a proxy for financial constraint. The total debt-to-asset ratio is not, however, a statistically significant indicator of financial constraint. In addition, firms with higher cash flow are less likely to need external financing and to be constrained if they do need it. We then estimate the firm-level total factor productivity by taking into account the measured likelihood of binding financial constraints. Coefficient estimates for labor and capital in the structural estimation of production function can be downward biased if financial constraints are omitted, because production inputs are negatively correlated with the likelihood of being constrained by external financing. This in turn leads to an upward bias in total factor productivity, which is about 4 percent according to our estimation. Finally, both investment and employment growth are negatively affected by the measured degree of financial constraints, pointing to the contribution of financial constraints to misallocation. |
| Keywords: | Productivity, Financial constraint, Production function, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwecf:6202&r=bec |