Unfinished business: Zombie firms among SME in Japan’s lost decades

The “soft budget problem,” by which banks loosen their lending stances toward long-term client firms despite worsening business conditions, has been widely discussed in the field of financial studies. In Japan, this problem has attracted attention particularly in connection to so-called “zombie firms,” financially weak firms sustained by discounted interest rates and evergreen lending which have become a major research and political interest in recent years. In this article, we focus on zombie firms among small and medium-sized enterprises (SME), a corporate category that has hitherto received less consideration in the discussion about Japan’s zombie firms. We find that: (1) many zombie firms exist among SME and that the zombie firm ratio increases as firm size decreases; and (2) some zombie firms eventually emerge from zombie status among SME. In other words, zombie firms are likely problematic from the view of the efficiency of the industries to which they belong. But when one considers that many zombie firms achieve revival, it would seem inappropriate to uniformly promote their elimination. Since ending zombie status seems to directly imply market exit for many SME, it is important to conduct preliminary screening to prevent the creation of zombie firms in the first place.     

The Impact of R&D Cooperations and Mergers in Pharmaceuticals on Research Activities and Drugs Offered on the Market

In the last 10 years, the pharmaceutical industry has experienced steep, unprecedented price increases which are frequently attributed to increasing drug development costs. To cope with rocketing development costs, companies engage in Research and Development (R&D) cooperations. We study the impact of R&D cooperations on firms' research activities and drugs offered on the market. Using a comprehensive dataset, we find that R&D cooperations formed at the early stage of the drug development process increase the number of R&D projects and the number of drugs offered on the market. Late stage R&D cooperations, formed among larger firms in technology and product markets, increase firms' research activities, but reduce the number of drugs launched on the product market. Results suggest that large firms cooperating in the late research stage re‐optimize their R&D pipelines and eliminate similarly aligned research projects.     

Assessing the Efficacy of Consumer Boycotts of U.S. Target Firms: A Shareholder Wealth Analysis

This article analyzes the effectiveness of 125 U.S. boycotts from 1978 to 2017. On average, the results suggest that actual consumer boycott calls against U.S. target firms (treatment firms) had a negative and statistically significant effect on the shareholder wealth of U.S. target firms. The synthetic control method and the placebo tests confirmed that the negative cumulative abnormal returns (CAR) observed here are robust and not due to idiosyncratic shocks unrelated to the announced boycotts. Negative and statistically significant boycott effects were also found for boycott threats and categorical issues related to union issues, animal rights, living wages in less‐developed countries, racial/sexual discrimination, ideological issues, and political/religious boycotts. The results also show that firms with a higher level of competition and advertising activity experienced larger negative boycott effects; and firms with higher net income observed mitigated boycott effects.     

Tax‐Adjusted q Model with Intangible Assets: Theory and Evidence from Temporary Investment Tax Incentives

We propose a tax‐adjusted q model with physical and intangible assets and estimate the effect of bonus depreciation in the United States in the early 2000s. We find that investment responds moderately to tax incentives, but allowing for heterogeneity reveals that intangible‐intensive firms respond more than physical‐intensive firms and that this difference is accentuated among large firms. Accounting for intangible assets increases the estimated total investment response from 3.7 to 14.3% of aggregate investment in 2000 among the largest 500 firms. Our results suggest that understanding the behavior of large and intangible‐intensive firms matters for investment policy.     

金融机构在构建创新型中小企业融资体系中的作用——基于广东省52家金融机构的调查报告

本文对广东省52家金融机构进行问卷调查基础上,以大量翔实数据为依据,对金融机构人员对创新型中小企业融资困境的认识,在资金、担保、咨询等方面对创新型中小企业融资支持现状进行了较全面的阐述,并从金融机构层面提出了改善中小企业融资环境的相关建议。     

What drives the profitability of Japanese multi-business corporations? A variance components analysis

This article decomposes the business-level profit rate of Japanese multi-business corporations by performing a variance components analysis on a large sample of publicly traded non-financial firms in 1998-2003. Consistent with US evidence, estimation results demonstrate that profitability is predominantly determined by business-level factors, not corporate-level ones, suggesting that a typical multi-business corporation in Japan is a combination of relatively distinct businesses in terms of profit.     

POST-CHANDLERIAN FIRMS: TECHNOLOGICAL CHANGE AND FIRM BOUNDARIES

While the Chandlerian firm has come to dominate large sectors of advanced economies, recent studies have shown that the properties of knowledge used by firms, the dynamic nature of transaction costs, and the impact of information and communication technologies on organisations might reduce firm scale and scope. We present a contingent model of firm boundaries that explains why, as a result of technological change, firms might simultaneously outsource some activities that they had formerly preferred to produce in-house while increasing their vertical integration in other areas. We support our conclusions with evidence from different industries.     

Bribery,corruption and bureaucratic hassle: Evidence from Myanmar

Corruption has been found to be the most severe obstacle to business operations, according to a recent survey of over 3000 firms in Myanmar. This paper sets out to understand the structure of corruption through an econometric analysis of this survey. It finds that firms with higher ‘ability to pay’ (proxied by sales revenue and employee growth) are more likely to pay bribes. While firms with lower ‘refusal power’ (i.e. those dependent on bureaucratic permissions to export and import) are more likely to find corruption to be an obstacle. A distinct but related question is whether bribes act as ‘efficiency grease’ by allowing firms to circumvent red tape. No evidence is found to support this hypothesis; in fact, firms that pay bribes report greater bureaucratic hassle compared to firms that do not. This result fits in more closely with the view that red tape could be used to extract bribes from firms.     

Evaluating the Economic Effects of Flat Tax Reforms Using Synthetic Control Methods

Tax reforms are often motivated by their potential to improve economic performance. However, their actual impacts are difficult to quantify. We analyze the impact of flat tax reform on incomes using “synthetic control” methods. We identify the eight Eastern and Central European countries that adopted flat tax systems between 1994 and 2005, and then compare post‐reform GDP per capita of “treated” countries with a convex combination of similar but “untreated” countries, while accounting for the time‐varying impact of unobservable heterogeneity. We find positive impacts in all eight countries, with seven out of eight cases significant at the conventional level.     

Product Scope and Productivity: Evidence from India's Product Reservation Policy

Protections for small enterprises are commonplace in developing countries. How do these policies affect overall industrial performance? Using exogenous variation in the timing of an Indian policy dismantling laws that “reserved” certain products for exclusive manufacture by small firms, we identify the effect of the dereservation policy on size, productivity, product churning, and other industry dynamics. Following the change, we find that firms significantly altered their product lines, leading to the reallocation of productive factors, increasing exits, and increasing total factor productivity. These effects were driven by new entrants moving into the formerly restricted product space, and in particular by multiproduct firms. Our findings underscore the importance of intrafirm heterogeneity on the impact of size‐contingent regulations, as firms' product line dynamics can be an important dimension of productivity growth.     

A panel study of zombie SMEs in Japan: Identification,borrowing and investment behavior

Utilizing a panel dataset of firms for the period 1999–2008, we estimated the prevalence of zombies among Japanese Small- and Medium-sized enterprises (SMEs) and their borrowing and investment behaviors. We observe that 4–13% of SMEs were zombie firms during the period 1999–2008. The estimation of the borrowing function reveals that SME zombie firms did not change their loans in response to a change in land values due to evergreening. We also observe that the profitability of investment, measured by marginal q, did not have positive effects on investments of zombie firms. This indicates that investment increase resulting from evergreen loans was not necessarily productive or profitable.     

What Factors Determine Whether Small and Medium Enterprises Obtain Credit from the Formal Credit Market? The Case of Vietnam

Using a survey of Vietnamese small and medium enterprises (SMEs) conducted during 2005–2013, this paper examines the process of applying for a formal loan and the level of satisfaction (credit needs) obtained by SMEs. The empirical results show that banking relationships and the business environment are important factors when applying for and obtaining formal credit. However, positive measures of firms' financial performance, such as a high return on assets score and sales growth, did not have a significant influence on whether firms obtained credit. Formal financial institutions in Vietnam were found to depend too much on collateral assets in assessing whether to supply credit to an SME.     

Local Rural Labour Markets: Enterprising or Constraining?

This paper examines SMEs' experiences of labour markets and their adoption of technology, including ICTs, in two rural areas: South Warwickshire and North Devon. Findings are assessed within the context of existing theories of rural industrial growth, which have tended to stereotype firms on the basis of location, and have underplayed the role of 'non-local' factors such as supply chains in influencing both the behaviour and 'success' of individual SMEs. In contrast, this paper contends that understanding the true complexity of the SME sector is essential if efforts to foster and support enterprise in rural areas are to be successful.     

SMALL AND MEDIUM ENTERPRISE DYNAMICS IN INDONESIA

This paper discusses the development of small and medium enterprises (SMEs) in Indonesia before and during the crisis. It argues that SME productivity has risen substantially, at rates not far from those of larger firms. Case studies indicate that various mechanisms are at work, such as technology diffusion through foreign buyers and subcontracting. The prevalence of SME clusters suggests that they benefit small and medium enterprise development. SMEs are found to have been weathering the crisis better than larger companies, though many have been hit hard too. Being less reliant on formal markets and formal credit, SMEs are able to respond more quickly and flexibly than their larger counterparts to sudden shocks. The paper argues that, rather than providing direct assistance to smaller firms, government should concentrate on creating a business environment conducive to small and medium business growth, and promoting provision of business development services by the private sector.     

Determinants and effects of the use of COVID-19 business support programs in Japan

Using a survey of and financial data for Japanese small- and medium-enterprises (SMEs), this paper examines the determinants of firms’ use of the business support programs provided by the Japanese government during the COVID-19 pandemic and their effect. With respect to the determinants, we obtain the following three findings: First, firms were more likely to have obtained subsidized loans, grants, or subsidies the more their sales had fallen during the pandemic, suggesting that funds flowed to firms that were adversely affected by the pandemic. Second, the likelihood that firms obtained funds was higher if their credit scores were lower or if they were classified as “zombies” and/or “low-return borrowers” before the pandemic, suggesting that the government programs also helped firms that had been under-performing before the pandemic. Third, firms were more likely to receive funds if they had a stronger relationship with their main bank before, suggesting that bank relationships play an important role in firms’ access to government programs. Regarding the causal effects, we obtain the following three findings: First, except for the subsidies for employment adjustment, the support programs increased the cash holdings of user firms. Second, subsidized loans from private financial institutions lowered exit rates, while none of the programs had a significantly positive effect on employment relative to non-users (or in absolute terms). Third, the credit scores and profit-to-sales ratio of firms that used the support programs decreased and the likelihood of such firms being a zombie and/or a low-return borrower increased. Overall, our findings provide a cautionary tale in that the business support programs produced mixed results in that they may have prevented business failures but have also helped to prop up firms that are not viable in the long run.     

Investissement étranger et développement régional : le cas de l’industrie automobile au Portugal

This paper tries to conceptualise the role of inward investment to the regional development process. The stereotype of the plundering of regional resources by foreign capital seems, in many cases, to belong to the past. Major firms, such as the transnationals, tend to emulate some organisational models characteristic to SME, thus establishing strong linkages with regional firms and local institutions. The study of the automobile cluster polarised by Autoeuropa (a VW plant) and its value chain allowed stressing the technological and organisational innovation in the Autoeuropa suppliers as a result of collaboration and co-operation forms of relation in the network. Among the most stimulating conclusions, one may highlight the existence of relevant forms of trade and untraded interdependencies between Autoeuropa and a restricted group of suppliers, which contradict the “cathedral in the desert” stereotype and confirm a new type of relation between inward investment and the regional development process.     

Corporate Social Responsibility or Payoff Asymmetry? A Study of an Endogenous Timing Game

We revisit an endogenous timing game by introducing corporate social responsibility into firms' payoffs. Previous research investigates an endogenous timing game in a mixed oligopoly, wherein one welfare‐maximizing public firm competes against profit‐maximizing private firms. It shows that the outcome is completely different from that of private oligopoly. In contrast to its result, we find that this change in payoff does not matter as long as the payoffs are symmetric. Our result indicates that asymmetry, and not welfare‐concerning objectives, yields specific results in the literature on mixed oligopoly.     

日本利率政策变革对中小企业融资模式影响的分析

二战后至今,日本利率政策总体经历了3个阶段的历史演进,这3次利率政策变革对中小企业融资模式产生了重要影响。普通银行、中小企业金融机构和政策金融机构等分别在不同时期发挥了重要作用。当前我国正值利率市场化改革的关键时期,中小企业融资难困境亟待解决,因而日本中小企业融资模式演进的经验具有一定的借鉴意义。     

WAS THERE A GUARANTEE EFFECT FOR THE OTTOMAN LOANS IN THE NINETEENTH CENTURY?

This study analyses the effect of formal guarantees of the British government on the performance of Turkish bonds issued in the second half of the nineteenth century. We compare the yields and prices of 11 bonds issued by the Ottoman government with different guarantees attached to each bond. Our findings indicate that the formal guarantee of the British government was significant in determining the prices and yields of Ottoman bonds. Even though the British guarantee had no effect on Ottoman institutions, practices, and fiscal fundamentals, the yields on the guaranteed loan did not move together with other Ottoman loans.     

中小企业创新网络形成与发展的动力机制研究

中小企业在促进经济增长、扩大就业方面发挥着重要的作用,而中小企业创新网络的构建,有助于中小企业在网络中获得技术创新的资源,提高企业的创新绩效。本文首先界定了中小企业创新网络的概念。并进一步具体分析中小企业创新网络的形成与发展的动力机制。