Does default point vary with firm size?

This article aims to improve the predictive ability of KMV model by distinguishing firm size. The evidence suggests that default point would vary with firm size. Using the method of particle swarm optimization, we obtain the optimal default point separately for large firms and small firms. Several statistical tests such as the model confidence set methodology show that our relatively tractable model is more likely to have the strongest predictive ability.     

The role of top management team diversity in shaping the performance of business model innovation: a threshold effect

Business model innovation is one of the firm’s most important strategic decisions. Top management team (TMT), as the critical decision-makers, has essential influence upon such decisions. However, the role of TMT diversity in shaping the performance of business model innovation is less explored in the literature. Based on a sample dataset of 906 observations of small and medium enterprises from China Startups Stock Market during the period of 2009–2011, we find that TMT diversity exhibits a significant threshold effect on the relationship between business model innovation (in terms of novelty-centred and efficiency-centred business model) and firm performance. More specifically, when TMT functional diversity arrives at a certain level, the positive relationship between novelty-centred business model and firm performance becomes more pronounced. On the other hand, the positive relationship between efficiency-centred business model innovation and firm performance will be more significant when TMT tenure diversity increases to a certain level.     

The dynamic impact of intellectual capital on firm value: evidence from China

We examine the dynamic relationship between intellectual capital (measured by human capital and organizational capital) and firm value of Chinese listed firms. We do causality identification using system GMM and IV estimation, and find no significant relation between human capital and firm value, but organizational capital positively affects firm value with a lag. Our findings are robust to firms with different property rights, of different sizes, or in different industries, with the only exception of capital-intensive firms, in which human capital has a significant influence on firm value. The results imply that the improvement of organizational system plays a more important role in raising the value of a firm in a typical developing country, like China.     

The role of imports for exporter performance in Peru

Using highly disaggregated firm‐level customs data for imports and exports in Peru over the 2000–12 period, we explore the relationship between imports of intermediate inputs and firm export performance. The evidence shows that greater use, variety and quality of imported intermediate inputs are significantly correlated with higher export levels and growth, greater market diversification and higher export quality at the firm level, even after controlling for unobserved firm heterogeneity. Exporter–importers exposed to higher tariffs, and non‐tariff measures import less in total and exhibit lower import variety, whereas those using an advance customs clearance procedure designed to facilitate imports exhibit higher imports and a more diversified bundle of inputs.     

Firms’ performance following the initial resignation of independent directors: evidence from Taiwan

This study investigates the operating performance of firms listed on the Taiwan stock exchange following the initial resignation of independent directors. The results show that the firms’ operating performance following the resignation of these directors has not only deteriorated, but is also significantly below the industry average. In addition, firms with a relatively severe agency problem, including firms that have lower insider or institutional shareholdings, receive audit opinions other than unqualified opinions or change their auditors prior to the resignation of the independent directors, tend to perform more poorly following the resignation.     

Efficiency,economy and effectiveness—but what about ethics? Supreme audit institutions at a critical juncture

Ethics is increasingly recognized as one of several important dimensions of performance. Yet, performance audit, or value-for-money audit, as conducted by supreme audit institutions (SAIs), does not typically include this dimension. Instead, the focus is on the classical ‘three Es’ (efficiency, economy and effectiveness). The reluctance to address issues of ethical misconduct has taken the audit practice of SAIs to a critical juncture, where the legitimacy of these audits ultimately is at stake. This paper explains why SAIs need to add a fourth ‘E’— ethical audit. Possible implications are discussed.     

The economics of markets and platforms

Advances in the study of both markets and platforms contribute to economics. Platforms are typically digital markets, although platforms can designate markets generally. So, the economics of markets and the economics of platforms are one and the same. Platforms show the critical role of intermediaries in endogenous price adjustment and market clearing. The platform model remedies problems with general equilibrium analysis by combining and extending the basic Walrasian and Marshalian market models. The analysis of platforms provides explanations for the bid–ask spread, including market power, search costs, matching costs, adverse selection, and moral hazard. The study of platforms demonstrates the importance of participation and coordination in the formation of markets. The discussion emphasizes that platforms have significant implications for the theory of the firm. The analysis further considers how platforms affect innovation and entrepreneurship.     

Does corporate diversification create value in emerging markets? New evidence from Chile

Using a sample of 85 Chilean firms listed in the Santiago Stock Exchange from 2005 to 2013, we analyze the impact of corporate diversification on firm value. We consider voting rights of the main shareholder and institutional investors’ influence on firm value. We report firm‐value destruction for diversified firms. Regarding ownership concentration, we report a negative relation between the largest shareholder ownership and firm value. Separation between voting rights and cash flows rights of this shareholder is negatively related to firm value. While Pension Fund Administrators (AFP) mitigate firm value destruction in diversified firms, other institutional investors do not play an active role in controlling value destruction. Finally, if the largest owner is a family, we report firm‐value creation in diversified firms. Copyright © 2016 ASAC. Published by John Wiley & Sons, Ltd.     

Aging Workforce,Firm Productivity and Labor Costs in Korea: Are Older Workers Costly to Firms?

Are older workers costly to firms? This study aims to investigate the relationship between an aging workforce on firm productivity and labor costs using a unique Korean firm‐level panel dataset (WPS) covering the period from 2007 to 2011. The primary results show no evidence of a negative relationship between the proportion of older workers and firm productivity, and no significant relationship between the proportion of older workers and labor costs. In addition, the findings of this study implies that failure to account for unobserved firm heterogeneity and endogeneity of changes in age structure biases the results toward finding a correlation between the age structure of workers and firm productivity and labor costs. Consequently, there is a tendency to underestimate the true value of older workers for firms.