Japan's elderly small business managers: Performance and succession

We investigate the effects of succession from an elderly to a nonelderly small business manager using firm-level data for Japan. The number of elderly small business managers has increased in Japan with the aging of the population; therefore, succession to younger managers has become an important policy issue. We make use of data for 2001–2015 for 188,021 small businesses, of which 77,773 at some point have a manager aged 60 or older and 8711 of these transition to a manager of under age 60. First, we investigate the relationship between firm performance and manager age. Performance is found to be lower for firms with elderly managers. Second, we estimate the determinants of succession in small businesses with elderly managers, showing that larger, less leveraged, more cash-rich, and profitable firms are more likely to transition to younger managers. Our results imply that more poorly performing firms are less likely to replace elderly managers, suggesting that such firms are not selected by young managers. Third, we examine post-succession performance using propensity score matching. Succession from elderly to young managers is shown to have positive effects on sales, employment, assets, return on assets, capital investment, and cash holdings. These results imply that succession improves firm growth. Furthermore, young successors tend to accumulate cash holdings implying that they are more risk averse and/or face tighter credit constraints than their predecessors.     

基于组织内部特征的家族企业成长障碍分析及解决对策

企业成长理论认为,企业竞争优势并非来自企业外部环境和有形资产,而来自企业内部的无形资产。因此,解决家族企业成长问题需从组织微观层面着手。我国家族企业内部关系复杂、差序式管理、家长式领导以及企业主能力缺陷等内部特征影响其对无形资产的学习和整合,阻碍了企业成长。组织认同是企业整合内部资源的有效手段,可成为家族企业打造竞争优势、实现持续成长的有效工具。     

股权的家族化、家族高管与家族企业业绩

文章利用2004-2015年中国A股家族控股上市公司的相关年度数据,从家族企业股权家族化视角出发,实证检验了股权家族化对家族企业业绩以及对企业是否聘任家族成员担任公司高管的经验影响关系。结果发现：（1）同等条件下,控股家族股权分配的家族化水平越高,其经营业绩表现越差;（2）家族成员担任CEO或董事长等关键高管会加剧股权家族化对家族企业业绩的负向影响关系;（3）同等条件下,公司股权的家族化更可能促使家族企业聘请家族成员担任CEO或董事长。此外,文章进一步分析发现,非核心家族成员参股企业会降低股权家族化与聘请家族成员担任公司CEO之间的正向影响关系。     

Social capital of black business owners

Analysis of data from the 1982Characteristics of Business Owners Survey reveals that there are some differences between the social capital (social resources available from group support networks) of black business owners and those of other ethnic groups. Black owners have had less exposure to entrepreneurial role models and training in firms run by close relatives than Asian, Hispanic, or nonminority male owners. They do not rely on their relatives or friends for business loans to the same extent as Asians, and show less such reliance than the other groups as well. Black owners compare favorably with Hispanics and nonminority males in using family funds as a source of nonborrowed capital, but are behind Asians. Black firms are relatively more likely to sell to minority customers and hire minority employees. Finally, black owners are the least likely to be married, which indicates some diminished help from the family, a key institution in group support networks.     

Micro and small enterprises and employment creation: A case study of manufacturing micro and small enterprises in South Africa

South Africa is characterised by extremely high unemployment, at a level that has the potential to derail its future political stability. This paper explores constraints on the job creation capabilities of micro and small enterprises, specifically focusing on the consequences of existing institutional and regulatory frameworks, looking at a panel of firms within the manufacturing sector. This study revealed that most of the small firms interviewed were locked into a ‘coping mode’, and were extremely reluctant to expand, which owners ascribed to inappropriate regulation, outright regulatory failures and/or poor labour relations. At the same time, many employers openly admitted to not adhering to at least some labour regulations. At a theoretical level, it is argued that there is much more to promoting enterprise than the formal protection of owner rights. The paper concludes with an assessment of the possibilities and challenges of the practicalities of reform.     

Interdependent investments in attached and movable assets under insecure land rights

The literature concludes that insecure land rights cause farms to make suboptimal capital investment in attached assets, but not in movable assets, implicitly assuming attached and movable assets to be independent. However, the two asset types can be interdependent because the operational efficiency of movable assets, such as farm machinery, typically depends on field conditions, such as land fragmentation. Thus, investment in attached assets may affect investment in movable assets via farm infrastructure. I develop a conceptual model to explain why tenure insecurity may lead a farm to under-invest in attached assets and over-invest in low-efficiency movable assets relative to the secure-land-right scenario. To quantify the economic significance of investment inefficiency, I collect unique survey data on large-scale farms, for which machinery is of particular importance in production, in Southwest China where land tenure remained insecure in 2016. Simulations based on the large-farm survey data suggest that the suboptimal investment occurs given fairly small probabilities of losing some farmland and results in considerable economic losses. The findings have important policy implications regarding land reforms and farm infrastructure in developing economies.     

No Successor,No Success? Impact of a Little Son on Business Performance

The dynasty model, which assumes the presence of intergenerational altruism, implies that business owners will have more incentive to improve the firm’s performance if they expect their children to take over the firms. This study empirically examines how top managers’ expectations about future family succession affect the performance of small family firms. Exploiting the sex of the top manager’s first-born child as an instrumental variable for the manager’s expectations about business succession by his child, we find that the existence of a potential family successor has a positive effect on profit. We also find that the presence of a potential family successor induces business expansion and the managers’ actions to enhance performance, such as improving operational efficiency and investing in information technology.     

Post‐IFRS Revaluation Adjustments and Executive Compensation

International Financial Reporting Standards (IFRS) allow firms to record adjustments (gains or losses) from the revaluation of investment properties in their income statements. After Hong Kong adopted IFRS in 2005, property companies were required to move their revaluation gains and losses (RGL) from equity to income. We find RGL to be a significant determinant of executive compensation in these firms after 2005, but not before. We further find evidence that the RGL‐compensation association is driven by firms with relative weak corporate governance structure, such as firms in which the controlling shareholders own a relatively small percentage of shares, firms in which the controlling shareholders have control rights that exceed ownership rights, and firms that are no longer run by their founders.     

Analysts' Interpretation and Investors' Valuation of Tax Carryforwards*

We examine how financial analysts and equity investors incorporate information on deferred taxes from carryforwards into earnings forecasts and share prices. We focus on carryforwards because, in providing this information each period, management must use their private information about the firm's profitability prospects. Thus, accounting measurement of tax carryforwards is another way of providing a management earnings forecast. In analyzing the role of carryforwards in valuation, we distinguish between two conflicting effects. First, deferred taxes from carryforwards represent future tax savings; hence, they should be valued positively as assets. In contrast, the existence of tax carryforwards may signal a higher likelihood of future losses, which would have a negative effect on expected earnings and share prices. We find that analysts consider earnings of firms with carryforwards to be less persistent because of the increased likelihood of future losses. We also find that analysts tend to be less precise and more optimistic (biased) in forecasting earnings of firms with carryforwards. This higher optimism and lower precision are more pronounced just after firms adopt Statement of Financial Accounting Standards (SPAS) 109 and are almost entirely corrected over time. An analysis of investors' valuation indicates a strong positive relation between deferred taxes from carryforwards and share prices, suggesting that these carryforwards are valued as assets. Also, earnings and book values of equity are valued less in firms that have carryforwards than in firms without carryforwards. Finally, the valuation allowance required under SFAS 109 assists equity investors in valuing a firm's earnings and net assets. The combined findings on analysts' interpretation and investors' valuation suggest that analysts fail to fully capture the implication of carryforwards on future earnings within their forecasting horizon.     

Mobile Payment and Informal Business: Evidence from China's Household Panel Data

This paper uses household panel data to explore the impact of mobile payments on China's household business activity. Using a difference‐in‐difference fixed effect specification, I find that mobile payment users are more likely to operate small‐scale and self‐employed informal businesses. The impact of using mobile payment primarily derives from the transition of agricultural families to business owners and the development of informal businesses. The paper illustrates an associated increase in employment and income for family members, with more pronounced effects on low‐income and rural households. It also provides prima facie evidence of the increase in fund transfers, which is important for risk sharing that informal businesses may encounter.     

Financing minority economic development

Conclusions A close analysis of the capital-asset pricing model’s assumptions and implications for efficient allocation of resources to investment in capital assets can form the basis for changes in the way capital markets are regulated by the federal government and in taxing policy of the government. In particular, our analysis indicates that the value of currently marketed assets can be increased by the inclusion in portfolios of currently nonmarketed assets.Moreover, the value of nonmarketed assets emerges as a significant instrumental variable for policy makers.The government can increase the value of all currently marketed assets by increasing positive changes in the value of nonmarketed assets.This might be accomplished by requiring by legislation or rule, for example, that a certain proportion of the listed securities on any exchange be comprised of the securities of black firms and other firms whose securities are not now marketed.The government might want, by tax incentive, to promote investment in firms with nonmarketed assets.It might want to increase the funding level of institutions such as MESBIC’S supplying equality finance to small black firms.     

EVALUATION OF CONTINGENT REPAYMENTS IN MICROFINANCE: EVIDENCE FROM A NATURAL DISASTER IN BANGLADESH

Frequent and strictly scheduled repayments and savings in microfinance often deteriorate the liquidity of members in the face of negative shocks. Previous articles suggest the introduction of a contingent repayment system that allows such members to be rescheduled, but the unavailability of a suitable dataset makes it difficult to examine how it would actually work. This study is one of the first to evaluate the impact of this repayment system on household livelihood. In employing a unique dataset from Bangladesh, I show that rescheduling reduces the possibility of binding credit constraints and borrowing from moneylenders, and may also reduce transitory poverty. However, short‐term rescheduling has insignificant effects. Indebted members with less liquid assets are more likely to be rescheduled.     

Do more highly educated entrepreneurs matter?

This paper uses a unique micro dataset of Chinese private firms surveyed in 2000 to investigate whether having a more highly educated entrepreneur affects a firm's performance. Identifying educational effects has been shown to be empirically challenging because it is difficult to overcome the likely omitted variable bias problem. We use the propensity score matching method to get around this identification problem. Matching results imply that on average, the firms whose owners received higher education had 5.2–5.8 percentage points higher return on equity, 115–126 percentage points higher profits, and 102–111 percentage points higher sales revenue, respectively, than firms that did not have higher educated entrepreneurs.     

Earnings Management to Avoid Losses and Earnings Decreases: Are Analysts Fooled?*

This paper explores whether analyst forecasts impound the earnings management to avoid losses and small earnings decreases documented in Burgstahler and Dichev 1997, whether analysts are able to identify which specific firms engage in such earnings management, and the implications for significant forecast error anomalies at zero earnings and zero forecast earnings. We use data from Zacks Investment Research 1999 and find that analysts anticipate earnings management to avoid small losses and small earnings decreases. Further, analysts are much more likely to forecast zero earnings than firms are to realize zero earnings, and analysts are unable to consistently identify the specific firms that engage in earnings management to avoid small losses. This latter inability contributes to significant forecast pessimism associated with zero reported earnings and significant forecast optimism associated with zero earnings forecasts.     

Enhancing macroeconomic resilience to natural disasters and climate change in the small states of the Pacific

Natural disasters and climate change are interrelated macro‐critical issues affecting all Pacific small states to varying degrees. In addition to their devastating human costs, these events damage growth prospects and worsen countries’ fiscal positions. This is the first cross‐country International Monetary Fund (IMF) study assessing the impact of natural disasters on growth in the Pacific islands as a group. A panel Vector Autoregressive (VAR) analysis suggests that, for damage and losses equivalent to 1 per cent of GDP, growth drops by 0.7 percentage points in the year of the disaster. The paper also discusses a multi‐pillar framework to enhance resilience to natural disasters at the national, regional, and multilateral levels and the importance of enhancing countries’ risk management capacities. It highlights how this approach can provide a more strategic and less ad hoc framework for strengthening both ex ante and ex post resilience and what role the IMF can play.     

台风灾害与地区经济差距:粤省证据

由于发达地区与欠发达地区在自然条件、产业结构以及进行减灾投资的能力和动力方面都有较大差异,总体而言,无论在何处登陆,台风对欠发达地区造成的直接经济损失都高于发达地区。欠发达地区的直接经济损失当中,很大一部分来自台风对基础设施的破坏,而这又阻碍了产业转移。因此,台风灾害会从多方面扩大地区经济差距。从趋势上看,台风灾害对广东省的总体破坏在增加,并且其破坏主要来自个别台风,这将进一步加剧地区经济差距。政府应在减灾投资上向欠发达地区倾斜,推广巨灾保险,加强应急管理能力建设,并提高科技抗灾投入。     

夫妻共同持股、公司治理与家族企业社会责任

婚姻和家庭关系可以通过家庭成员的嵌入而深刻影响家族企业的公司治理及战略决策。文章采用手工搜集的2010-2018年中国A股上市家族企业实际控制人及其配偶持股数据，检验了夫妻共同持股的治理模式对家族企业社会责任的影响。结果发现：相比丈夫单独持股企业，夫妻共同持股家族企业的社会责任表现更差，其CSR总得分与CSR评级均显著更低。机制检验表明，夫妻共同持股时，双方家族成员会更多的介入企业经营治理并担任董监高职务、企业内部控制质量更差、大股东利益侵占更加严重，低效的公司治理水平抑制了家族企业的社会责任表现。文章结论在采用工具变量法、PSM、安慰剂检验、实际控制人婚变等一系列稳健性检验后仍然成立。文章研究表明女性“她力量”未能在家族企业社会责任领域发挥决定性作用。     

Parents’ Use of Subsidiaries to “Push Down” Earnings Management: Evidence from Italy

We find evidence consistent with Italian nonlisted subsidiaries engaging in accrual and real earnings management, so that their listed parents can meet or beat benchmarks. Thus, the parent firm drives the earnings management of the subsidiaries. We identify parents that are more likely to have managed earnings as the ones that avoid a small loss or meet or beat analyst forecast by a few cents. Cross‐sectional analysis reveals that Big 4 auditors mitigate accrual earnings management at the subsidiary level and that family‐owned firms use earnings management through nonlisted subsidiaries mainly to avoid reporting losses. Finally, we find that parent firms communicate earnings management strategies to their subsidiaries using board proximity. Our evidence shows that business groups manage earnings differently from single firms, pushing earnings management down to subsidiaries. It also supports the monitoring role of Big 4 auditors in a business group setting and contributes to understanding financial reporting decisions in family‐owned firms.     

The economics of the family firm

Abstract

The paper investigates how far the study of family firms constitutes a subject in its own right. It is argued that family ownership per se does not require the development of a special theory of family firms. It is suggested that the uniqueness of the family firm resides in the strength of the dynastic motive, which may strengthen trust between family members, but discourages the recruitment of non-family members and so inhibits the growth of the firm. The strength of the dynastic motive varies across family firms. The paper summarises two recent approaches to the economic theory of family firms which attempt to formalise these insights, and demonstrates the complementarities between them.     

Firm-level impacts of natural disasters on production networks: Evidence from a flood in Thailand

This paper explores the firm-level impact of the 2011 flooding in Thailand, specifically, the impact on procurement patterns at Japanese affiliates in Thailand. We find that, first, small firms are more likely to lower their local procurement share, especially their share of procurement from other Japanese-owned firms in Thailand. Second, young firms are more likely to increase their share of imports from Japan, whereas old firms are more likely to look to China. Third, there is no impact on imports from ASEAN and other countries. These findings are useful for uncovering how multinationals adjust their production networks before and after natural disasters.