What happens after corporate default? Stylized facts on access to credit

In this paper, we investigate what happens to firms after they default on their bank loans. We approach this question by establishing a set of stylized facts concerning the evolution of corporate default and its resolution, focusing on access to credit after default. Using a unique dataset from Portugal, we observe that half of the corporate default episodes last 5 quarters. Most firms continue to have access to credit immediately after resolving default, though only a minority has access to new loans. Firms have more difficulties in regaining access to credit if they are small, if their default was long and severe, if they borrow from only one bank or if they default with their main lender. Further, half of the defaulting firms record another default in the future. We observe that firms with repeated defaults are, on average, smaller and experience longer and more severe defaults.     

Covalence and ionic bonding in business-to-business relationships: Insights from chemistry

The paper examines business-to-business (B2B) relationships using the framework of the covalence-ionic bonding theory in chemistry as an analogy to help make soft phenomena and relationships in B2B marketing more understandable to engineers and scientists in organizations and to managers with scientific and technical backgrounds. In the tradition of cross-fertilization of various scientific fields, the authors propose that the covalence-ionic bonding theory may provide insights in determining the factors that contribute to the emergence of bilateral, unilateral, and market relationships. This study compares and contrasts interparticle bonding with ways of managing B2B relationships. Beyond sheer analogy of the two phenomena, an explanation of B2B relationships and decision-making mechanisms is proposed. In adapting this concept theoretically, the meaning of the original parameters in physical science is assigned a new meaning in the marketing context. Furthermore, the paper extends conceptually the predictive capabilities of chemistry theories to relational behaviors in marketing. Drawing from a resource-based view of the firm, complementarity of resources and dependence levels are postulated to have critical roles in business bonding. Appropriate propositions are advanced, along with implications for managers and researchers.     

The survival of new plants: Start-up conditions and post-entry evolution

This paper examines the longevity of entrants. We find size to be an important determinant of the chances of survival, this being particularly relevant to de novo entrants as compared with entry by established firms. Current size is also found to be a better predictor of failure than initial size. Moreover, our findings indicate that, after controlling for size differences, past growth matters for survival suggesting a partial adjustment process for firm size in the post entry period. Finally, new plants are more likely to live longer if they enter growing industries or industries with little entry activity.     

The effect of home-ownership on labor mobility in the Netherlands

In various macro-studies, home-ownership is found to hamper job mobility and to increase unemployment. This paper addresses similar issues, but uses a micro-econometric framework where both individual job mobility, as well as the probability of being homeowner are modeled simultaneously. Using a panel of individual labor and housing market histories for the period 1989–1998, we estimate a nonparametric model of both job durations and home-ownership. We do not find homeowners to change less from jobs than tenants. Instead, our results suggest that the housing decision is driven by job commitment, and not the reverse. We do however find homeowners to be less vulnerable to unemployment.     

A comparison of financial duration models via density forecasts

Using density forecast evaluation techniques, we compare the predictive performance of econometric specifications that have been developed for modeling duration processes in intra-day financial markets. The model portfolio encompasses various variants of the Autoregressive Conditional Duration (ACD) model and recently proposed dynamic factor models. The evaluation is conducted on time series of trade, price and volume durations computed from transaction data of NYSE listed stocks. The results show that simpler approaches perform at least as well as more complex methods. With respect to modeling trade duration processes, standard ACD models successfully account for duration dynamics while none of the models provides an acceptable specification for the conditional duration distribution. We find that the Logarithmic ACD, if based on a flexible innovation distribution, provides a quite robust and useful framework for the modeling of price and volume duration processes.     

Business cycle dynamics with duration dependence and leading indicators

Durland and McCurdy [Durland, J.M., McCurdy, T.H., 1994. Duration-dependent transitions in a Markov model of US GNP growth. Journal of Business and Economic Statistics 12, 279–288] investigated the issue of duration dependence in US business cycle phases using a Markov regime-switching approach, introduced by Hamilton [Hamilton, J., 1989. A new approach to the analysis of time series and the business cycle. Econometrica 57, 357–384] and extended to the case of variable transition parameters by Filardo [Filardo, A.J., 1994. Business cycle phases and their transitional dynamics. Journal of Business and Economic Statistics 12, 299–308]. In Durland and McCurdy’s model duration alone was used as an explanatory variable of the transition probabilities. They found that recessions were duration dependent whilst expansions were not. In this paper, we explicitly incorporate the widely-accepted US business cycle phase change dates as determined by the NBER, and use a state-dependent multinomial Logit modelling framework. The model incorporates both duration and movements in two leading indexes – one designed to have a short lead (SLI) and the other designed to have a longer lead (LLI) – as potential explanatory variables. We find that doing so suggests that current duration is not only a significant determinant of transition out of recessions, but that there is some evidence that it is also weakly significant in the case of expansions. Furthermore, we find that SLI has more informational content for the termination of recessions whilst LLI does so for expansions.     

Influence of customer participation on creating and sharing of new product value

This research applies an institutional arrangement perspective to develop an end-to-end model for the interaction between customers and upstream suppliers to develop a new product to understand how new product value is created and shared. The model is empirically tested by collecting primary data from 188 manufacturers across different industries. The research demonstrates that customer participation affects new product value creation by improving the effectiveness of the new product development process by enhancing information sharing and customer–supplier coordination and by increasing the level of customer and supplier specific investments in the product development effort. In addition, increasing the formalization of the customer participation process enhances both customer and supplier relationship-specific investments in the new product development process. The impact of customer participation on the customer's share of the new product value pie is more complex then is first apparent. Based on the dependence and equity perspectives the results suggest that exchange partners' power (relative dependence) positively influences a partner's ability to capture new product value, but this power is offset by a desire of exchange partners to ensure the distribution of value is “fair” and reflects each party's contribution to the value creation.

Nonparametric estimation of a dependent competing risks model for unemployment durations

In this paper we simultaneously analyze transitions from unemployment to employment and to nonparticipation. We estimate a dependent competing risks model with nonparametric specifications of the destination-specific duration dependence and unobserved heterogeneity terms, allowing for mutual dependence of the unobserved heterogeneity terms. We use an administrative data set covering all registered French unemployed over the period 1988–1994, stratified by gender type, duration class and exit state. We thank the Editor and three anonymous referees for their useful comments. A preliminary version of this paper was distributed under the title “Individual variation in exit rates from unemployment: a nonparametric multivariate analysis using aggregate data”. The Département de Marché du Travail of the Ministère du Travail, de l’Emploi et de la Formation Professionelle of France kindly provided the data.     

Firm survival: methods and evidence

This paper surveys the Industrial Organization literature on firm survival. We find that, in retrospect, the econometric specifications used in this area have progressively become more sophisticated, addressing issues such as discrete time, unobserved heterogeneity and competing risks. We also identify a number of firm- and industry-specific covariates that provide largely consistent results across samples, countries and periods. On the other hand, the evidence is less clear-cut with regard to ownership and spatial factors.