Pyramidal structure,risk‐taking and firm value

This article investigates the relationship among pyramidal layers, risk‐taking and firm value using a sample of local state‐owned enterprises (SOEs) in China. We find that state‐pyramidal layers have a positive and significant impact on firm risk‐taking and firm value, suggesting that the pyramidal structure formed by the state protects SOEs from political intervention. Risk‐taking is conducive to enhancing firm value and is one of the important channels through which state‐pyramidal layers increase firm value. By exploring the role of state‐pyramidal organizational structures in improving SOEs' risk‐taking, our results contribute to both corporate governance and corporate finance literature.     

The impact of privatization on firm performance in a transition economy

The Vietnamese privatization programme, launched in 1992, differs from the usual Western privatization programmes in terms of the residual percentage of shares owned by the state and the portion of shares owned by insiders. This begs the question whether these differences influence the effects of the programme on firm performance. This study measures the impact of privatization on firm performance in Vietnam by comparing the pre‐ and post‐privatization financial and operating performance of 121 former state‐owned enterprises (SOEs). We find significant increases in profitability, sales revenues, efficiency and employee income. Results of applying the ‘difference‐in‐difference’ (DID) method, wherein a control group of firms is used to pick up the influence of other determinants of firm performance, suggest that the performance improvements may indeed be associated with equitization. Regression analyses reveal that firm size, residual state ownership, corporate governance and stock market listing are key determinants of performance improvements.     

State‐owned Enterprises,Inequality, and Political Ideology

State‐owned enterprises continue to play a considerable role in many economies. In this study we empirically investigate the connections between these enterprises and inequality as mediated through political ideology. Using cross‐country data on the relative size of the state‐owned enterprise sector, we find strong empirical support for an inverted U‐shaped relationship between its size and income inequality. We also find strong evidence that left‐wing (vis‐a‐vis right‐wing) governments are associated with a larger state‐owned enterprise sector in countries with higher inequality. This result is robust to using cross‐sectional vs. panel data, different identification strategies, and various controls.     

Political connections and corporate performance: Evidence from Pakistan

This study seeks to understand how political connections affect firm performance. Using a hand‐collected dataset of Pakistani firms from 2008–2014, our firm fixed effects and Heckman two‐stage regression results show that connected firms outperform those without political ties. Moreover, we show channels through which political benefits are realized in terms of greater access to debt, lower financing costs and lower tax rates. These benefits are found to be particularly large when firms are connected to politicians who held political positions most recently and firms connected through their owners. Finally, we do not find evidence for differences in political favours across regulated and unregulated industries.     

REGIONAL ANTI‐CORRUPTION EFFORT,POLITICAL CONNECTIONS AND FIRM INNOVATION EFFORT: EVIDENCE FROM CHINA

This paper examines how firm characteristics and local anti‐corruption effort moderate the influence of political connections on enterprises’ private R&D investment using data from 2,587 Chinese A‐share listed enterprises. Our results show that the local anti‐corruption institutional environment significantly moderates the strong relationship between political connections and enterprises’ private R&D investment. Firm characteristics (i.e., firm size and firm age) also show a moderating effect on the relationship between political connection and enterprises’ private R&D investment; larger and older enterprises are more likely to have innovative resources and business cooperation partners, and thus are able to reduce their degree of reliance on political connections and government funding. The results of our study suggest the importance of having a transparent and fair institutional environment for enterprise innovation activities.     

地区市场化进程、市场分割与公司关联交易行为

文章以我国制造类行业上市公司为研究样本,考察转轨经济环境下不同地区间市场化发育水平对企业交易方式的影响。研究发现,与资金占用型关联交易显著不同,购销关联交易能显著提高公司绩效;产品和要素市场越不发达、市场化水平越低的地区企业购销类关联交易越多。结论证明,在市场发育不完善制度环境下,关联购销成为企业降低交易成本的有效交易方式,这支持了关联交易具有效率观的思想。文章结论对于理解转轨经济环境下企业特殊交易行为具有重要意义。     

Export Spillovers of FDI on China's Domestic Firms

This paper examines the horizontal and vertical export spillovers of foreign direct investment (FDI) on China's manufacturing domestic firms by using firm‐level census data over the period of 2000–03. Based on a Heckman two‐step procedure combining first differencing and instrumental variable regression techniques, it is found that FDI has had a positive impact on the export value of domestic firms mainly through backward technology spillovers and a positive impact on the export‐to‐sales ratio of domestic firms through horizontal export‐related information spillovers. After decomposing FDI by different market orientation and domestic firms by different ownership, the paper finds that the positive impact on domestic firms' export values is mainly from the nonexporting and the exporting foreign‐invested enterprises while the positive impact on domestic firms' export‐to‐sales ratios is mainly from the high‐exporting foreign‐invested enterprises. Both types of export spillovers are mainly diffused to domestic non‐state‐owned enterprises.     

THE EFFECTS OF FIRM BOUNDARY AND FINANCING CONSTRAINTS ON UTILITY COSTS: THE CASE OF MUNICIPALLY OWNED ELECTRICITY DISTRIBUTION UTILITIES

ABSTRACT: A number of studies have examined costs and potential for scale and scope economies in electricity distribution; however, few if any, have examined this area in terms of the unique constraints associated with municipal ownership or historical and regulatory constraints associated with former municipal ownership. This paper focuses on 19 distribution‐only municipally owned utilities for a ten‐year period (1988–97). Distortions from variable outputs but largely fixed inputs are minimized. The data used were collected specifically to assess productivity, cost, and efficiency performance and include value‐based capital inputs and service prices. Outputs include energy conveyed and number of connections; inputs include capital, system losses, labour, and materials. We examine the effect of using third‐party financing (e.g., connection charges), with its inherent principal‐agent problems, on utility costs, as well as the effect of shared services and multi‐utility output (e.g., electricity and water). A translog total cost function is estimated. Our findings suggest significant returns to scope but also significant increases in costs associated with the use of third‐party financing. The results also suggest scale diseconomies. Shared outputs, which have been greatly restricted or eliminated under restructuring, may have provided larger, and now lost, economies than the scale returns blindly pursued by some through restructuring or incented/forced mergers or divestitures. Finally, it is clear that third‐party financing can raise costs; such financing is widely used among utilities providing electricity, gas, water, and telecommunications, and should be closely scrutinized.     

How does violence affect exporters? Evidence from political strikes in Bangladesh

Using novel daily data, we examine the impact of political violence on firm‐level export activity. Our data cover the universe of political strikes and export transactions in Bangladesh during 2010–2013 and allow us to examine the effects of these strikes at a highly granular level. We first show that multiday political strikes lower the likelihood that a firm will export by 6.30 percentage points. We then examine whether these disruptions result in adverse effects on export prices. Given that this violence creates greater risk of missed shipments, importers may respond by demanding lower prices as compensation. We provide the first evidence of such adverse price effects of political violence. Our results suggest that during July to December, 2013, when there was a multiday political strike every 5 days, the prices of time‐sensitive Bangladeshi products declined by 1.59%.     

THE EFFICIENCY OF THE STATE‐OWNED FIRM AND SOCIAL WELFARE: A NOTE

We consider a mixed market where a state‐owned firm competes with private firms. If the number of firms is exogenous, then a deterioration of the efficiency of the state‐owned firm might improve social welfare. This situation occurs when the state‐owned firm is inefficient and private firms are efficient. However, if the number of firms is endogenous, then a deterioration of the efficiency of the state‐owned firm must reduce social welfare.     

Political control and performance in China's listed firms

The performance implications of the involvement of grassroots local party committees of the Chinese Communist Party (CCP) in the decision making of China's listed firms are investigated. First, we show that the decision-making power of local party committees relative to the power of the largest shareholders is associated positively with firm performance. This result suggests that party control restrains the largest shareholders from expropriation but that the existing level of party control is insufficient to control the largest shareholders. Second, we show that the decision-making power of local party committees relative to managers is associated negatively with firm performance. This result suggests that the political costs associated with party control over managers are more detrimental to firm performance than are agency problems and that the existing level of party control over managers is excessive. On balance, our results indicate that the existing level of party control is excessive and that reducing the decision-making power of local party committees would improve the performance of China's listed firms. Journal of Comparative Economics 32 (4) (2004) 617–636.     

Political Connectedness and Firm Performance: Evidence from Germany

Abstract. This paper investigates politically connected firms in Germany. With the introduction of a new transparency law in 2007, information on additional income sources for all members of the German parliament became publicly available. We find that members of the conservative party (CDU/CSU) and the liberal party (FDP) are more likely to work for firms than members of left‐wing parties (SPD and The Left) or the green party (Alliance 90/The Greens). Politically connected firms are larger, less risky and have lower market valuations than unconnected firms. They also have fewer growth opportunities, but slightly better accounting performance. On the stock market, connected firms significantly outperformed unconnected firms in 2006, i.e. before the publication of the data on political connections. Differences in stock market performance were much smaller in 2007.     

Market Size and the Survival of Foreign‐owned Firms*

We develop a general equilibrium model with heterogeneous firms and foreign direct investment cost uncertainty and investigate the survival of foreign‐owned firms. The survival probabilities of foreign‐owned firms depend on firm‐level characteristics, such as productivity, and host country characteristics, such as market size. We show that a foreign‐owned firm will be less likely to be shut down when its parent firm's productivity is higher and its indigenous competitors are less productive. Although a larger market size will always reduce the survival probability of indigenous firms, it can lead to a higher survival probability for foreign‐owned firms if their parent firms are sufficiently productive.     

企业规模与创新:来自中国省级水平的经验证据

本文使用我国1985—1997年省级水平的面板数据,应用动态面板模型方法对我国企业规模与创新的地区间差异问题进行了研究。本文的基本发现是,在我国,企业规模对创新有显著的促进作用,但是企业规模对创新的正向关系主要来源于非国有企业,而不是国有企业。这说明企业规模与创新的关系要以一定的企业治理结构为条件,单纯的规模化和集团化并不一定能够保证企业的创新能力。     

关联交易与公司治理机制

由于公司治理水平低,我国上市公司的控股股东利用关联交易掏空公司的情况非常严重。通过实证分析发现:第一大股东持股比例与关联交易的发生概率呈倒U型关系;股权制衡度与关联交易的发生概率显著负相关;隶属于企业集团增加了关联交易的发生概率;董事会效率、信息披露透明度与关联交易的发生概率无显著关系。     

Big is Beautiful when Exporting

This paper starts out from the observation that the export ratios of firms (export to sales ratios) vary greatly among firms and that they are systematically higher for larger exporters. We relate the difference in export ratios to firm‐level differences in transport costs. In accordance with the data, we assume that freight rates are a function of firm‐level export volumes. We test our model using Japanese manufacturing firm‐level data. We first estimate the elasticity of the freight rate with respect to firm‐level export volumes at the sector level. When feeding these estimates back into the model, it can explain more than 50% of the variation in firm‐level export ratios.     

How Profit Shifting May Increase the Tax Burden of Multinationals: A Simple Model with Discrete Investment Choices

This paper models a Stackelberg tax setting game between two revenue‐maximizing countries which compete for the location of a single production plant owned by a multinational firm. We introduce the possibility of profit‐shifting activities by the multinational firm and investigate how a change in the costs of profit shifting affects equilibrium tax rates, revenue, and the tax burden of the multinational firm. We show that in most cases, tax rates of the two countries will be higher under profit shifting than without. If the costs for profit shifting are not too low, the strategic adjustment of profit tax rates will typically harm the multinational firm.     

Employment adjustment in the global crisis

This paper analyzes the employment adjustment of domestic, foreign and state‐owned companies before and during the global crisis. Using Hungarian firm‐level data for the period between 2006 and 2012 and matching foreign and state‐owned firms to domestic enterprises by industry and employment, it finds that the net job creation rate is similar in domestic and state‐owned firms while it is larger by 3.5 percent in foreign‐owned enterprises before the crisis. Domestic and foreign‐owned firms react to the crisis in very similar fashion by dropping net job creation by about 4 percentage points. Contrary to this behaviour, state‐owned enterprises do not decrease net job creation in some, and increase it by 3.5‐6 percent in other regressions.     

Deconstructing gravity: trade costs and extensive and intensive margins

Abstract This paper uses data on US exports to decompose exports into the number of exporting firms (the extensive margin) and average export sales (the intensive margin). We show how a range of proxies for trade costs has different impacts on the two margins. Distance has a negative effect on both margins, but the magnitude is considerably larger for the extensive margin. Most of the variables capturing language, internal geography, infrastructure and import cost barriers work through the extensive margin. We show that these results are consistent with a Melitz‐style model of trade with heterogeneous firm productivity and fixed costs.     

Firm ownership and internal labour practices in a transition economy

One feature common to many post‐socialist transition economies is a relatively compressed wage structure in the state‐owned sector. We conjecture that this compressed wage structure creates weak incentives for work effort and worker skill acquisition and thus presents adverse consequences for the entire transition economy if a substantial portion of the labour force works in the state sector. We explore firm wage incentives and worker training, as well as other labour practices and outcomes, in a transition setting with matched firm and worker data collected in one of the largest provinces of Vietnam – Ho Chi Minh City. The Vietnamese state sector exhibits a compressed wage distribution in relation to privately owned firms with foreign ownership. State wage practices stress tenure over worker productivity and their wage policies result in flatter wage–experience profiles and lower returns to education. The state work force is in greater need of formal training, a need that is in part met through direct government financing. In spite of the opportunities for government financed training and at least partly due to inefficient worker incentives, state firms, by certain measures, exhibit lower levels of labour productivity. The private sector comparison group to state firms for all of these findings is foreign owned firms. The internal labour practices of foreign firms are more consistent with a view of profit‐maximizing firms operating with no political constraints. This is not the case for Vietnamese de novo private firms that exhibit much more idiosyncratic behaviour and whose labour practices are often indistinguishable from state firms. The exact reasons for this remain a topic of on‐going research yet we conjecture that various private sector constraints, including limited access to formal capital, play an important role.