Pub Date : 2021-08-23DOI: 10.1080/13571516.2021.1949241
M. Agostino, L. Errico, Sandro Rondinella, F. Trivieri
Abstract This work investigates to what extent the relevance of close bank-firm ties is affected by the endowment of social capital characterising the environment in which enterprises operate. By estimating the link between the duration of lending relationships and Italian SMEs’ productivity, we empirically test whether there is complementarity or substitutability between credit relations and social capital. According to our results, the duration of lending relationships seems to be a positive and significant determinant of SMEs’ performance in less civic regions. Additionally, the influence of enduring lending relationships decreases as social capital increases, suggesting that social capital might act as a substitute for lending relationships.
{"title":"Lending Relationships and SMEs’ Productivity. Does Social Capital Matter?","authors":"M. Agostino, L. Errico, Sandro Rondinella, F. Trivieri","doi":"10.1080/13571516.2021.1949241","DOIUrl":"https://doi.org/10.1080/13571516.2021.1949241","url":null,"abstract":"Abstract This work investigates to what extent the relevance of close bank-firm ties is affected by the endowment of social capital characterising the environment in which enterprises operate. By estimating the link between the duration of lending relationships and Italian SMEs’ productivity, we empirically test whether there is complementarity or substitutability between credit relations and social capital. According to our results, the duration of lending relationships seems to be a positive and significant determinant of SMEs’ performance in less civic regions. Additionally, the influence of enduring lending relationships decreases as social capital increases, suggesting that social capital might act as a substitute for lending relationships.","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":"243 1","pages":"57 - 87"},"PeriodicalIF":1.2,"publicationDate":"2021-08-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73128707","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-08-23DOI: 10.1080/13571516.2021.1961563
Amrit Judge, Anna Korzhenitskaya
Abstract This paper examines whether the possession of a credit rating has an impact on firms leverage ratio. The issue of access to alternative sources of debt finance has received special attention in the wake of 2007–2009 financial crisis when banks significantly cut back on loans and firms became credit-constrained. Consequently, policy makers have been examining ways of facilitating access to non-bank finance. An overreliance on bank sourced debt finance when credit markets tighten has the potential to slow down the speed of economic recovery. This paper provides empirical evidence in support of the hypothesis that the possession of a credit rating is associated with higher leverage ratios. The effect for UK firms seems higher than that observed for similar US firms. This might be because there is greater financial transparency in the US implying lower levels of information asymmetry and so negating somewhat the effects of possessing a rating.
{"title":"Do Credit Ratings Determine Capital Structure?","authors":"Amrit Judge, Anna Korzhenitskaya","doi":"10.1080/13571516.2021.1961563","DOIUrl":"https://doi.org/10.1080/13571516.2021.1961563","url":null,"abstract":"Abstract This paper examines whether the possession of a credit rating has an impact on firms leverage ratio. The issue of access to alternative sources of debt finance has received special attention in the wake of 2007–2009 financial crisis when banks significantly cut back on loans and firms became credit-constrained. Consequently, policy makers have been examining ways of facilitating access to non-bank finance. An overreliance on bank sourced debt finance when credit markets tighten has the potential to slow down the speed of economic recovery. This paper provides empirical evidence in support of the hypothesis that the possession of a credit rating is associated with higher leverage ratios. The effect for UK firms seems higher than that observed for similar US firms. This might be because there is greater financial transparency in the US implying lower levels of information asymmetry and so negating somewhat the effects of possessing a rating.","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":"6 1","pages":"89 - 118"},"PeriodicalIF":1.2,"publicationDate":"2021-08-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90109746","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Keith M. Drake, Robert He, T. Mcguire, Alice Ndikumana
Abstract After receiving FDA approval, a generic drug manufacturer can launch ‘at risk’ before any patent infringement litigation concludes, but it risks paying damages if it ultimately loses the litigation. A generic can eliminate the risk by waiting to launch until after the appeals process is complete but waiting has downsides too. We examine FDA approvals of generic drug applications with ‘first-filer’ status (which precludes other generics from entering beforehand) to examine empirical patterns of at-risk entry. In our data, litigants usually settled prior to a legal decision. For the remainder, drugs that received FDA approval prior to a favorable district court decision were always launched at risk. Generics without FDA approval before a favorable district court decision launched upon approval unless the approval was close in time to the appeal decision, or it had forfeited the first-filer exclusivity (indicating a low cost of waiting).
{"title":"No Free Launch: At-Risk Entry by Generic Drug Firms","authors":"Keith M. Drake, Robert He, T. Mcguire, Alice Ndikumana","doi":"10.3386/w29131","DOIUrl":"https://doi.org/10.3386/w29131","url":null,"abstract":"Abstract After receiving FDA approval, a generic drug manufacturer can launch ‘at risk’ before any patent infringement litigation concludes, but it risks paying damages if it ultimately loses the litigation. A generic can eliminate the risk by waiting to launch until after the appeals process is complete but waiting has downsides too. We examine FDA approvals of generic drug applications with ‘first-filer’ status (which precludes other generics from entering beforehand) to examine empirical patterns of at-risk entry. In our data, litigants usually settled prior to a legal decision. For the remainder, drugs that received FDA approval prior to a favorable district court decision were always launched at risk. Generics without FDA approval before a favorable district court decision launched upon approval unless the approval was close in time to the appeal decision, or it had forfeited the first-filer exclusivity (indicating a low cost of waiting).","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":"11 1","pages":"301 - 315"},"PeriodicalIF":1.2,"publicationDate":"2021-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79354114","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-07-15DOI: 10.1080/13571516.2021.1941715
Sabeeh Ullah, Sumaira Khan, S. Hussain, Mehtab Alam, M. Haroon
Abstract Emerging economies are characterised by a high proportion of family-owned businesses, significant political corruption, and a weak legal system which creates a more favourable environment for politically-connected family firms. Hence, we investigate the effect of political connections on firm performance in family and non-family-owned firms through advanced panel estimation techniques. Our result is based on a sample of publicly listed 150 non-financial firms from Pakistan Stock Exchange (PSX) over the period 2013–2018. We demonstrate that politically connected family-owned firms perform better than non-family owned connected firms. These findings have important policy implications for countries such as Pakistan which have experienced recent increases in the number of family-owned firms.
{"title":"Political Connections, Family Ownership, and Firm Performance: An Emerging Economy","authors":"Sabeeh Ullah, Sumaira Khan, S. Hussain, Mehtab Alam, M. Haroon","doi":"10.1080/13571516.2021.1941715","DOIUrl":"https://doi.org/10.1080/13571516.2021.1941715","url":null,"abstract":"Abstract Emerging economies are characterised by a high proportion of family-owned businesses, significant political corruption, and a weak legal system which creates a more favourable environment for politically-connected family firms. Hence, we investigate the effect of political connections on firm performance in family and non-family-owned firms through advanced panel estimation techniques. Our result is based on a sample of publicly listed 150 non-financial firms from Pakistan Stock Exchange (PSX) over the period 2013–2018. We demonstrate that politically connected family-owned firms perform better than non-family owned connected firms. These findings have important policy implications for countries such as Pakistan which have experienced recent increases in the number of family-owned firms.","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":"13 1","pages":"471 - 487"},"PeriodicalIF":1.2,"publicationDate":"2021-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80249103","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-06-29DOI: 10.1080/13571516.2021.1945856
Paul Farah, Hui Li
Abstract We examine the lack of planning in CEO successions and its effect on shareholder wealth for 162 cases of no succession planning. We attribute the lack of potential or actual permanent replacement at the time of the announcement of departure or actual departure of the CEO to the great need for an outsider selection to lead the company. Our findings suggest that the effect of relaxing the time constraint to choose a successor is mixed. An increase in shareholders wealth will reward boards that are able to select an outsider. Companies that appoint an insider after an interim period have a poorer performance than companies that appoint an insider in an orderly succession process. We find that the lack of succession planning does not affect long term performance if boards are willing to put effort towards selecting the most suitable candidates.
{"title":"The Effects of CEO Succession Planning on Shareholder Wealth","authors":"Paul Farah, Hui Li","doi":"10.1080/13571516.2021.1945856","DOIUrl":"https://doi.org/10.1080/13571516.2021.1945856","url":null,"abstract":"Abstract We examine the lack of planning in CEO successions and its effect on shareholder wealth for 162 cases of no succession planning. We attribute the lack of potential or actual permanent replacement at the time of the announcement of departure or actual departure of the CEO to the great need for an outsider selection to lead the company. Our findings suggest that the effect of relaxing the time constraint to choose a successor is mixed. An increase in shareholders wealth will reward boards that are able to select an outsider. Companies that appoint an insider after an interim period have a poorer performance than companies that appoint an insider in an orderly succession process. We find that the lack of succession planning does not affect long term performance if boards are willing to put effort towards selecting the most suitable candidates.","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":"64 1","pages":"207 - 222"},"PeriodicalIF":1.2,"publicationDate":"2021-06-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80592006","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-05-04DOI: 10.1080/13571516.2020.1823188
Derek J. Clark, Anita Michalsen, L. Olsen
Abstract We analyze the effect of the European Union Competition Authority’s block exemption towards R&D cooperatives in a horizontal market structure, valid as long as the combined product market share is not too large. Two less efficient firms attempt to catch up with a technological leader, and may use the safe harbour provided by the legislation. We consider when the incentives of the R&D-performing firms are aligned with those of consumers, and when increases in the market share limit improves welfare. We show that an effective policy within this framework might be elusive. The market share restriction must be set in order that it is optimal for firms to use the safe harbour, and that this leads to more R&D than under competition. Even in this case, further increases in the market share restriction can harm welfare. This has widespread implications for how the EU Competition authority should respond to calls for an increase in the market share restriction.
{"title":"The EU Block Exemption and Horizontal R&D Agreements","authors":"Derek J. Clark, Anita Michalsen, L. Olsen","doi":"10.1080/13571516.2020.1823188","DOIUrl":"https://doi.org/10.1080/13571516.2020.1823188","url":null,"abstract":"Abstract We analyze the effect of the European Union Competition Authority’s block exemption towards R&D cooperatives in a horizontal market structure, valid as long as the combined product market share is not too large. Two less efficient firms attempt to catch up with a technological leader, and may use the safe harbour provided by the legislation. We consider when the incentives of the R&D-performing firms are aligned with those of consumers, and when increases in the market share limit improves welfare. We show that an effective policy within this framework might be elusive. The market share restriction must be set in order that it is optimal for firms to use the safe harbour, and that this leads to more R&D than under competition. Even in this case, further increases in the market share restriction can harm welfare. This has widespread implications for how the EU Competition authority should respond to calls for an increase in the market share restriction.","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":"43 1","pages":"221 - 245"},"PeriodicalIF":1.2,"publicationDate":"2021-05-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79403229","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-10DOI: 10.1080/13571516.2021.1880252
Atanu Saha, Yong Xu
Abstract Using a panel dataset of 78 branded drugs for the period January 2009 through March 2020, we examine whether brand prices react to the onset of generic competition. Contrary to the findings of several prior academic studies, we show that the rate of change of brand prices (both nominal and CPI-deflated) are significantly lower after generics enter the market; notably, we also find branded drug manufacturers raise their prices in the six-month period just before generic entry and lower them in the six-month period after, with the differences in the rates of change being highly significant. We also show in markets with an authorized generic and in ones with large pre-entry brand sales, manufacturers raise prices at a higher (or decrease CPI-deflated prices at a shallower) rate.
{"title":"The ‘Generic Competition Paradox’ Revisited","authors":"Atanu Saha, Yong Xu","doi":"10.1080/13571516.2021.1880252","DOIUrl":"https://doi.org/10.1080/13571516.2021.1880252","url":null,"abstract":"Abstract Using a panel dataset of 78 branded drugs for the period January 2009 through March 2020, we examine whether brand prices react to the onset of generic competition. Contrary to the findings of several prior academic studies, we show that the rate of change of brand prices (both nominal and CPI-deflated) are significantly lower after generics enter the market; notably, we also find branded drug manufacturers raise their prices in the six-month period just before generic entry and lower them in the six-month period after, with the differences in the rates of change being highly significant. We also show in markets with an authorized generic and in ones with large pre-entry brand sales, manufacturers raise prices at a higher (or decrease CPI-deflated prices at a shallower) rate.","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":"2009 1","pages":"363 - 375"},"PeriodicalIF":1.2,"publicationDate":"2021-03-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82612185","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-10DOI: 10.1080/13571516.2021.1889917
Bent Petersen, Gabriel R. G. Benito, L. Welch
Abstract Firms’ ability to change foreign operation modes appears highly desirable in an increasingly volatile and unpredictable global environment. We propose and discuss mode flexibility as a management capability, with the aim at curbing the potential downsides of flexibility; in particular, the extra costs of coordination and contracting as well as revenue losses due to diminished partner commitment. We model the balancing and shifting of essential tradeoffs in relation to the two dimensions of mode flexibility – multiplicity and switchability – and highlight modularization and reciprocal use of real options as examples of tradeoff-shifting mechanisms that may improve the cost-benefit balance of mode flexibility.
{"title":"Foreign operation mode flexibility: tradeoffs and managerial responses","authors":"Bent Petersen, Gabriel R. G. Benito, L. Welch","doi":"10.1080/13571516.2021.1889917","DOIUrl":"https://doi.org/10.1080/13571516.2021.1889917","url":null,"abstract":"Abstract Firms’ ability to change foreign operation modes appears highly desirable in an increasingly volatile and unpredictable global environment. We propose and discuss mode flexibility as a management capability, with the aim at curbing the potential downsides of flexibility; in particular, the extra costs of coordination and contracting as well as revenue losses due to diminished partner commitment. We model the balancing and shifting of essential tradeoffs in relation to the two dimensions of mode flexibility – multiplicity and switchability – and highlight modularization and reciprocal use of real options as examples of tradeoff-shifting mechanisms that may improve the cost-benefit balance of mode flexibility.","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":"1 1","pages":"281 - 307"},"PeriodicalIF":1.2,"publicationDate":"2021-03-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77463205","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-08DOI: 10.1080/13571516.2021.1896926
Preeya S. Mohan
Abstract Crime and growing the private sector are pertinent development challenges. Despite their importance there is a paucity of research on crime and business performance, particularly in developing countries, partly because of limited firm level data. This study used cross sectional firm data from the Productivity Technology Innovation survey (PROTEqIN) gathered in 2014 across 13 Caribbean countries to investigate violent crimes and company performance using Ordinary Least Squares regression, and several robustness checks including Instrumental Variables and Propensity Score Matching. The Caribbean provides an apt study given that a key characteristic of the business environment is high exposure to crime. The study found that firm sales and violent crime are negatively associated, even after firm characteristics, other factors which influence sales, and country and sector fixed effects were taken into account. The findings of this study underscore the importance for crime prevention, control and reduction policies to grow the private sector.
{"title":"Violent Crime and Firm Performance: Evidence from the Caribbean","authors":"Preeya S. Mohan","doi":"10.1080/13571516.2021.1896926","DOIUrl":"https://doi.org/10.1080/13571516.2021.1896926","url":null,"abstract":"Abstract Crime and growing the private sector are pertinent development challenges. Despite their importance there is a paucity of research on crime and business performance, particularly in developing countries, partly because of limited firm level data. This study used cross sectional firm data from the Productivity Technology Innovation survey (PROTEqIN) gathered in 2014 across 13 Caribbean countries to investigate violent crimes and company performance using Ordinary Least Squares regression, and several robustness checks including Instrumental Variables and Propensity Score Matching. The Caribbean provides an apt study given that a key characteristic of the business environment is high exposure to crime. The study found that firm sales and violent crime are negatively associated, even after firm characteristics, other factors which influence sales, and country and sector fixed effects were taken into account. The findings of this study underscore the importance for crime prevention, control and reduction policies to grow the private sector.","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":"1 1","pages":"309 - 327"},"PeriodicalIF":1.2,"publicationDate":"2021-03-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72769431","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-08DOI: 10.1080/13571516.2021.1893570
Timothy Flannery, S. Roberts
Abstract We design an experiment to test what motivates agents to choose higher effort and how well principals anticipate agent responses. Principals rank five contracts where a higher ranking increases the likelihood of a contract's implementation. In one treatment, those rankings remain hidden from agents; in the other, agents view the rankings. Agent response to contract structure and monetary incentives largely conforms to our predictions: agents demonstrate a preference for monotonic contracts over non-monotonic contracts, and the vast majority responds favorably to contracts where high effort is a best response. Surprisingly, offering a flat contract that exactly compensates agents for effort performs no better than offering nothing. Principals, however, poorly anticipate agent response to contracts, regardless of the observability of rankings. Additionally, although differences in observable rankings only affect agent behavior in minor ways, principals' rankings between the two treatments indicate principals believed different rankings would significantly influence agents when observable.
{"title":"Agent Motivation and Principal Anticipation: Non-Monotonicity, Intentions, and Other Factors","authors":"Timothy Flannery, S. Roberts","doi":"10.1080/13571516.2021.1893570","DOIUrl":"https://doi.org/10.1080/13571516.2021.1893570","url":null,"abstract":"Abstract We design an experiment to test what motivates agents to choose higher effort and how well principals anticipate agent responses. Principals rank five contracts where a higher ranking increases the likelihood of a contract's implementation. In one treatment, those rankings remain hidden from agents; in the other, agents view the rankings. Agent response to contract structure and monetary incentives largely conforms to our predictions: agents demonstrate a preference for monotonic contracts over non-monotonic contracts, and the vast majority responds favorably to contracts where high effort is a best response. Surprisingly, offering a flat contract that exactly compensates agents for effort performs no better than offering nothing. Principals, however, poorly anticipate agent response to contracts, regardless of the observability of rankings. Additionally, although differences in observable rankings only affect agent behavior in minor ways, principals' rankings between the two treatments indicate principals believed different rankings would significantly influence agents when observable.","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":"14 1","pages":"335 - 361"},"PeriodicalIF":1.2,"publicationDate":"2021-03-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80380574","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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