Mixed ownership and firm performance: Evidence from the Chinese venture capital industry

We examine the impact of mixed ownership on the performance of venture capital (VC) firms in China. We use successful/unsuccessful exits from VC-financed entrepreneurial companies and number of patent applications by VC-financed companies as proxies for VC firms' performance. Consistent with existing research on the inferior performance of SOEs relative to non-SOEs, we find that on average government-controlled VC firms (GVCs) underperform domestic private investors-controlled VC firms (PVCs). More importantly, we find that introducing minority private investors (i.e., mixed ownership) helps improve the performance of GVCs. However, we find no evidence that introducing minority government investors (i.e., mixed ownership) helps improve the performance of PVCs. Our results provide relevant information to the ongoing debate on the role of the government investors and private investors in developing the VC industry in emerging markets.     

Does vertical specialisation increase productivity?

This paper investigates the impact of global value chain (GVC) participation on productivity. It uses data on trade in value‐added from the World Input‐Output Database. The results based on a panel estimation covering 13 sectors in 40 countries over 15 years suggest that participation in GVCs is a significant driver of labour productivity. Backward participation in GVCs, that is, the use of imported inputs to produce for exports, emerges as particularly important. An increase by 10% in the level of GVC participation increased average productivity by close to 1.6%.     

Opening and linking up: firms,GVCs, and productivity in Latin America

This work explores the relationship between exports, global value chains (GVCs)’ participation and position, and firms’ productivity. To this aim, we combine the most recent World Bank Enterprise Survey in Latin American and Caribbean (LAC) countries with the Organisation for Economic Co-operation and Development and World Trade Organization trade in value-added data. To explore the above relationship, we adopt an extended version of the standard Cobb-Douglas output function including indicators of export performance and GVCs. We control for heterogeneity among firms (by country, region, and industry), sample selection, firms’ characteristics, and reverse causality. Our empirical outcomes confirm the presence of a positive relationship between participation in international activities and firm performance. They also show that both participation in GVCs and position within GVCs matter. These findings have strong policy implications and may help policymakers in choosing the best policy options to enhance the link between GVCs’ integration and firms’ productivity.     

Earnings management and firms' investment behavior: The threshold effect of ROE

This paper, on the basis of a sample of Chinese listed firms, investigates the relationship between both real and accrual-based earnings management activities and firms' capital investment behavior. We apply the threshold model proposed by Hansen (1999) and find firms managing earnings can either over or underinvest, depending upon firms' return on equity (ROE) level. The study results show an inverted relationship between earnings management and firms' investment, which changes from negative to positive with ROE rising beyond certain threshold levels. We also find that the level of ROE affects whether managers use real and accrual manipulations jointly or as substitutes in affecting firms' investment. Our evidence is important because it sheds new light on the relationship between earnings management activities and firms' investment behavior by showing that ROE may act as an important determinant in this relationship. This finding has important implications for policymakers such as the Chinese Securities Regulatory Commission (CSRC) as it shows that the regulatory benchmarks they set may have a significant impact on firms' investment behavior.     

How innovation impacts firms' export survival: Does export mode matter?

The innovation-export nexus has been extensively explored, while relatively few studies have focused on innovation's impact on firms' export survival and the role of export mode. Using a large panel dataset from China, this research empirically explores how innovation impacts firms' export survival, considering export modes. First, we employ the discrete-time survival analysis model (cloglog) to examine this research addressing the censored issue. Second, the propensity score matching (PSM) methodology is employed to address the selection-bias issue and select the similar firms based on which to compare their Kaplan–Meier survivor probability. Results present a positive role of innovation in the export survival of direct exporters; however, there is an inverted-U relationship between innovation intensity and their survival probability. For indirect exporters, evidence shows an insignificant innovation-export survival nexus. In addition, results show higher export survival for Chinese innovative exporters who are foreign-owned, highly export-intensive, long-lasting in export market, in technology industries. For innovative exporters who export directly, those in medium and low-technological industries and export capital goods are more likely to survive. Our research provides insights for Chinese exporters regarding innovation participation and suggests the government conducting prudent and deliberate design for innovation strategy.     

Impact of professor-directors on Chinese firms' environmental performance

This study investigates the impact of academic professor-directors on Chinese firms' environmental performance. We find that the presence of board directors who are also professors has a positive impact on firms' environmental protection performance, and the result is robust after controlling for the potential endogeneity of professor-directors. This is consistent with the notion that professor board directors are perceived to take more social responsibility and are more likely to advocate for sustainability. However, this positive impact is mitigated significantly by the presence of professor board directors with administrative titles. Moreover, the above results are mainly driven by non-state-owned enterprises, firms with less powerful CEOs, firms with better analyst coverage, and firms with less financial distress. Our study highlights the importance of academic directors for firms' environmental performance.     

Sovereign wealth funds investment effects on target firms' competitors

We investigate the impact of sovereign wealth funds acquisitions (SWFs) on the performance of target firms' competitors. We find a positive and significant impact of SWFs acquisitions on target firms' competitors. This means that market participants anticipate value creation in the targets competitors, due to likely expected restructuring activities. Further analysis shows that relatively large rivals, low leveraged rivals, rivals with highly correlated returns with those of their corresponding targets, rivals in less competitive industries show higher abnormal returns upon the acquisition announcement. Our results question the rationality of protectionism as legal barriers to sovereign wealth funds cross-border investments.     

Government subsidies and corporate investment efficiency: Evidence from China

This study examines how state subsidies to firms affect corporate investment efficiency. Using archival data from a sample of Chinese listed firms over the 2007–2015 period, we find that government subsidies have a negative effect on firms' investment efficiency, and this negative effect is more pronounced for firms that are less financially constrained. Further analyses suggest that government subsidies are positively associated with firms' over-investment, although they alleviate under-investment. Our findings are robust to a series of tests to alleviate concerns about potential endogeneity and self-selection bias.     

Stock liquidity during COVID-19 crisis: A cross-country analysis of developed and emerging economies,and economic policy uncertainty

We investigate the impact of the COVID-19 on firms' stock liquidity across six developed and emerging economies. Unlike prior literature, we further compare the effects of the pandemic between developed and emerging economies, high and low economic policy uncertainty (EPU), and large and small firms. Our results document the significant negative impact of infection cases and deaths on firms' stock liquidity across the sample countries, and the similar effect of their interaction term. We find that the impact is more pronounced in the developed economies, high EPU and small firms, compared to emerging economies, low EPU and large firms, respectively.     

Government ownership and the cost of debt for Chinese listed corporations

This study investigates the impact of government controlling ownership on the cost of debt of Chinese listed corporations. We find that corporations under government control have a lower cost of debt compared to corporations under private control, and that government ownership is most beneficial when firms exhibit financial distress, have high excess shareholder control, or operate in provinces with low institutional development. Our evidence that government ownership plays an important role in reducing Chinese firms' cost of debt may help explain why government involvement in business corporations remains prevalent in China after decades of economic reform.     

Internationalization Factors of Thai Multinationals and Thailand's Bilateral Trade Policy

This article investigates the impact of Thailand's recent bilateral free-trade agreements (FTAs) on the internationalization of Thai multinational enterprises (MNEs). The results highlight the relative importance of internal and external factors in the internationalization of developing country MNEs. The empirical evidence indicated that Thai MNEs judged bilateral FTAs as a critical facilitator of internationalization success. The FTAs facilitated firms' exports to a certain degree and marginally expedited firms' international purchasing activities. The influence of FTAs on firms' foreign investment was not discernible.     

Determinants of China's bilateral trade balance in global value chains

This paper identifies the determinants of China's bilateral trade balance using a new measure based on international input–output data, the so-called ‘trade in value-added’ (TiVA), which can prevent double counting in the estimation of bilateral trade balance. Our results show that using a measure based on gross exports, rather than TiVA, causes relatively large overestimation of the impact of the RMB exchange rate on China's bilateral trade balance. This overestimation is mainly because that the increasing production of exports may require increasing intermediate imports as a consequence of international fragmentation of production in global value chains. In addition, our results also show that the impact of FDI inflows on China's bilateral trade balances depends on the position and role of China and its trading partners in GVCs.     

Trade and technology adoption

This paper endogenizes firms' choices of production technology in what would be a standard Melitz model otherwise. The responses of firms' productivity to trade liberalization are heterogenous: exporters, on average, improve their level of technology adoption, whereas nonexporters downgrade their level of technology adoption. The degree to which firms adjust production technology depends on domestic market size, export destination market size, trade impediments, and export status. The conflicting empirical results of the impact of trade liberalization on exporters' productivity are rationalized by showing that changes in different trade costs (variable vs. fixed costs) affect firms' productivity differently. We calibrate the model's parameters to match firms' characteristics in the global economy. The results indicate that endogenous productivity increases the gains from trade liberalization.     

Foreign sourcing and exporting

The aim of this paper was analysing the role of sourcing intermediate inputs internationally on export decisions and distinguishing whether intermediates are sourced from firms belonging to the same business group or from independent suppliers. To analyse firms' export decisions, we use a specification that also accounts for sunk costs and accumulated experience in export markets (i.e., export market learning). We consider that importing intermediates might have direct and indirect effects (operating through enhanced productivity) on the export participation decision. The direct effects on exporting are isolated once we control for productivity and the effects of belonging to an international group. We use a manufacturing panel data set drawn from the Spanish Survey on Business Strategies (ESEE) for the period 2006–14. Both productivity and inward or outward FDI increase the probability of exporting. Moreover, our results uncover the existence of sunk costs and export market learning, and also the relevant role played by intermediate imports in firms' export choices. Their effects act both through the (indirect) channel of enhancing firms' productivity and through a direct effect related to product upgrading, more competitive selling prices or learning from the firm's import experience.     

Global value chain and its impact on the linkage between exchange rate and export: Cases of China,Japan and Korea

The link between exchange rate and trade has been studied for a long time, but there is no consensus about their relation. This paper tests the old argument, whether depreciation of real effective exchange rates (REERs) raises exports. We differentiate the test with earlier studies by employing a new measurement of REER and incorporating the effect of GVCs. We measured REER at industry level with value‐added trade weights. We analysed the topic with LSDV and system GMM for China, Japan and Korea since these counties are known to participate actively in GVCs. Our main finding is that exchange rate has significant impact on trade for three countries. However, the movement of elasticity of export to REER varies by country. While the elasticity in China decreased over time, Korea and Japan experienced increasing patterns between mid‐1990s and mid‐2000s and decreasing trends afterwards. This study also tests whether the level of incorporation in GVCs causes a change in elasticity. The results show that growing participation in GVCs lowers the elasticity of export to REER in absolute value. However, this result is only statistically significant in Korea.     

Productivity and Effectiveness in Service Firms

Service firms are facing pressures which are leading them to seek increases in productivity. While attempts to increase productivity in goods-producing organisations seldom affect customers, such attempts in service firms are very likely to impinge upon customers' perceptions of the service. The need for service firms' marketing personnel to be involved in the assessment of the impact of attempts to raise productivity is thus clear. Furthermore, the need to assess the impact of increases in productivity on the firm's effectiveness rather than in traditional efficiency terms is emphasised.     

How Firm Strategies Impact Size of Partner‐Based Retail Networks: Evidence From Franchising

How do firms' partnering strategies impact the size of their partner‐based retail networks? We draw on agency theory to address this question in the context of franchising. Our econometric analyses (based on 9 years of longitudinal balanced panel data) include assessment of data nonstationarity and estimation of a dynamic panel data model that accounts for unobserved heterogeneity and endogeneity. Our findings indicate that franchisee network size is driven more by franchisor strategies that mitigate agency costs than by strategies that simply lower entry and ongoing costs and barriers for franchisees.     

Listed peers' giving and corporate philanthropy: The motivations to imitate

The impact of industrial peers' donations on firms' charitable practices has been tested and verified in existing literatures. This paper further studies the motivations and scenarios of non-listed companies to imitate their listed counterparts in the same industry to formulate charitable policies. Deeply rooted in institutional isomorphism theory, uncertainty and professional networks are employed as philanthropic motives for unlisted companies to mimic their listed peers. Managerial decision mechanisms and network status perceptions enhance imitation by reinforcing decision uncertainty and network effect. Institutional environment heterogeneity can amplify or reduce the imitative stimulus of managers' decision mechanisms and status perceptions. Our empirical tests are based on a unique dataset of 14,873 unlisted firms and their corresponding listed counterparts in China from 2006–2016, and use Tobit regression methods. The results show a significantly positive association between listed peers' giving and non-listed firms' donation. The peer effects are intensified when non-listed firms' decentralized decision-making and higher managers' status identification are present. Furthermore, when the institutional environment changes from weak to strong, the impetus of decentralized decision-making and status identification will be weakened. These findings contribute to the corporate philanthropy literature and facilitate the development of effective corporate charity policies and government promotion of philanthropic responsibility.     

Financial factors and exporting decisions

Is financial health a determinant of export market participation? Is it an outcome? Using a panel of 9292 UK manufacturing firms over the period 1993–2003, we explore the links between firms' financial health and their export market participation decisions. We find that exporters exhibit better financial health than non-exporters. Yet, when we differentiate between continuous exporters and starters, we see that this result is driven by the former. Starters generally display low liquidity and high leverage, possibly due to the sunk costs which need to be met to enter export markets. Furthermore, we find no evidence that firms enjoying better ex-ante financial health are more likely to start exporting, and strong evidence that participation in export markets improves firms' financial health.     

Does global value chain engagement improve firms' wages: Evidence from China

Better understanding of the effect of the global value chain (GVC) on wages is a key issue for determining welfare gains from engagement in international integration. We study whether and how China's engagement in the GVC enhances firms' wage by using firm‐level and customs transaction‐level data covering the period 2000–06 with the methods of propensity score matching (PSM), difference in differences (DID) and generalised propensity score (GPS). The empirical results show that first, GVC engagement can improve firms' wage. Second, the improvement effect is more prominent in capital‐intensive and foreign‐invested enterprises. Third, the degree of embedment in the GVC shows a U‐shaped relationship with wages (the marginal improvement changes from decreasing to increasing). Finally, by analysing the mechanism, we find that participation in the GVC ultimately improves the overall wage level of enterprises through the productivity effect and the reallocation effect of labour demand.