Entrepreneurship in post‐conflict transition1

We examine new self‐employment entry and its viability in Bosnia and Herzegovina, using a rich household survey for the years 2001–2004. We find that wealthier households are more likely to engage in viable self‐employment and create employment suggesting an important role for financing constraints. Specifically, although having an existing bank relationship is not significantly related to the entry decision, it is positively related to the survival for new entrepreneurs and their employment creation. We also find a non‐linear relationship between remittances and entry in that individuals not receiving remittances are more likely to enter self‐employment; but, if they do receive them, the likelihood of starting a business increases in the fraction of wealth received from domestic remittances. Finally, people working in the informal sector are more likely to become viable entrepreneurs, particularly those provided with loans from micro‐credit organizations. These findings support the perception of the informal sector as an incubator for formal self‐employment in the early years of transition.     

Business Groups and Corporate Responsibility for the Public Good

This paper analyzes the relationship between Business Groups as a distinct way of organizing economic activities and their relation to the public good. We first analyze the phenomenon of Business Groups and discuss some of their core features. Subsequently, the paper moves to analyzing the existing literature on Business Groups and corporate social responsibility (CSR) as the most common label for the topic of this Special Issue. Subsequently, specific peculiarities of Business Groups in the context of CSR and their contribution to the public good are fleshed out. Based on this analysis, the paper delineates some implications for the field of CSR and the wider debate on the nature of the firm. We close with some perspectives for future research.     

Market discipline and deposit insurance

Cross-country evidence presented in this paper suggests that explicit deposit insurance reduces required deposit interest rates, while at the same time it lowers market discipline on bank risk taking. Internationally, deposit insurance schemes vary widely in their coverage, funding, and management. This reflects that there are widely differing views on how deposit insurance should optimally be structured. To inform this debate, we use a newly constructed data set of deposit insurance design features to examine how different design features affect deposit interest rates and market discipline.     

SMEs,Growth, and Poverty: Cross-Country Evidence

This paper explores the relationship between the relative size of the Small and Medium Enterprise (SME) sector, economic growth, and poverty alleviation using a new database on the share of SME labor in the total manufacturing labor force. Using a sample of 45 countries, we find a strong, positive association between the importance of SMEs and GDP per capita growth. The data do not, however, confidently support the conclusions that SMEs exert a causal impact on growth. Furthermore, we find no evidence that SMEs alleviate poverty or decrease income inequality.     

Access to Financial Services: Measurement, Impact, and Policies

In many developing countries less than half the population hasaccess to formal financial services, and in most of Africa lessthan one in five households has access. Lack of access to financeis often the critical mechanism for generating persistent incomeinequality, as well as slower economic growth. Hence expandingaccess remains an important challenge across the world, leavingmuch for governments to do. However, not all government actionsare equally effective and some policies can even be counterproductive.This paper sets out principles for effective government policyon broadening access, drawing on the available evidence andillustrating with examples. The paper concludes with directionsfor future research. JEL Codes: D31, G20, G21, O12, O16     

Real wages,profit margins and inflation in Turkish manufacturing under post-liberalization

This article reports investigations into the behaviour of gross profit margins (mark-ups) in Turkish manufacturing industries for the post-1980 liberalization period in relation to price inflation, trade liberalization (openness) and real wage costs. Panel data econometrics over 29 subsectors of Turkish manufacturing are used over the period 1980–1996. Results suggest that profit margins are positively and significantly related both to price inflation and real wage costs. However, openness is found to have very little impact on profit margins.     

Leveraging foreign institutional logic in the adoption of stock option pay among Japanese firms

Research summary : We investigate why Japanese firms have adopted executive stock option pay, which was developed with shareholder‐oriented institutional logic that was inconsistent with Japanese stakeholder‐oriented institutional logic. We argue that Japanese managers have self‐serving incentives to leverage stock ownership of foreign investors and their associated institutional logic to legitimize the adoption of stock option pay. Our empirical analyses with a large sample of Japanese firms between 1997 and 2007 show that when managers have elite education, high pay inequality with ordinary employees, and when firms experience poor sales growth, foreign ownership is more likely associated with the adoption of stock option pay. The study shows the active role of managers in facilitating the diffusion of a new governance practice embodying new institutional logic. Managerial summary : Why have Japanese firms adopted stock option pay for executives? Inconsistent with Japanese stakeholder‐oriented tradition in corporate governance, such pay has been believed to prioritize managerial attention to the interests of shareholders over those of other stakeholders. However, to the extent that shareholders' interests are legitimate in the Japanese context, executives who have self‐serving incentives to adopt such pay can leverage the need to look after shareholders' interest in their firms to legitimize their decisions. In a large sample of Japanese firms, we find that foreign ownership (representing shareholders' interests) is more likely to be associated with the adoption of stock option pay when managers are motivated to receive such pay, such as when they have elite education, high pay inequality with ordinary employees, or poor sales growth. Copyright © 2015 John Wiley & Sons, Ltd.     

Information asymmetry and investment–cash flow sensitivity

Models of capital market imperfections predict that information asymmetry decreases firm investment and increases the sensitivity of investment expenditures to fluctuations in internal funds. Previous empirical tests of the link between investment and financing decisions have relied on indirect measures of financial constraint due to market frictions. In contrast, we use more direct measures derived from the market microstructure literature. Consistent with the theoretical predictions, our analysis shows that scaled investment expenditures are on average lower and the investment–cash flow sensitivity is greater when the probability of informed trading is high. Our results are robust to alternative measures of informed trading and liquidity, but they are not pervasive in our sample.     

Visa restrictions and their adverse economic and marketing implications – Evidence from China

Governments spend considerable public resources, including tax dollars, on marketing their cities or countries in order to become a strong brand attractive for exports, foreign direct investment and tourism. Ironically at the same time, self-imposed and strict visa regulations that can potentially hamper the productivity of marketing and branding are fairly common. There are valid reasons for imposing strict visa regulations, two of the most important being national and economic security. Although strict visa regulations are a common phenomenon around the world, the tourism academia have yet to argue against strict visa regulations by providing empirical evidence on their potential impact on tourism demand, and hence the economy. The current study is a pioneer attempt to generate awareness about the potential detrimental impacts of visa restrictions on a country’s economy, by using the case of People’s Republic of China, one of the countries known to have a history of strict visa regulations. The research reported in this paper was based on the standard tourism demand function, which models the causal relationship between tourism demand and a number of macroeconomic variables. The autoregressive distributed lag model (ADLM) was used since it has a dynamic specification that takes the time path of the tourist decision-making process into consideration by using both current and lagged values of variables. Results show the negative effect of visa regulations on both country-level and prefecture-level economies. Implications are discussed and recommendations provided.