The Impact of Overconfident Customers on Supplier Firm Risks
Yiwei Fang, Iftekhar Hasan, Chih-Yung Lin, Jiong Sun
Journal of Economic Behavior and Organization,
May
2022
Abstract
Research has shown that firms with overconfident chief executive officers (CEOs) tend to overinvest and are exposed to high risks due to unrealistically optimistic estimates of their firms’ future performance. This study finds evidence that overconfident CEOs also affect suppliers’ risk taking. Specifically, serving overconfident customers can lead to high supplier risks, measured by stock volatility, idiosyncratic risk, and market risk. The effects are pronounced when customers aggressively invest in research and development (R&D). Our results are robust after addressing self-selection bias and using different CEO overconfidence measures. We also document some real effects of customer CEO overconfidence on suppliers.
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Forced Displacement, Exposure to Conflict and Long-run Education and Income Inequality: Evidence from Croatia and Bosnia and Herzegovina
Adnan Efendic, Dejan Kovač, Jacob N. Shapiro
Abstract
This paper investigates the long-term relationship between conflict-related migration and individual socioeconomic inequality. Looking at the post-conflict environments of Bosnia and Herzegovina (BiH) and Croatia, the two former Yugoslav states most heavily impacted by the conflicts of the early 1990s, the paper focuses on differences in educational performance and income between four groups: migrants, internally displaced persons, refugees, and those who did not move two decades after the conflicts. For BiH, the analysis leverages a municipality-representative survey (n = 6, 021) that captured self-reported education and income outcomes as well as migration histories. For Croatia, outcomes are measured using an anonymized education registry that captured outcomes for over half a million individuals over time. This allows an assessment of convergence between different categories of migrants. In both countries, individuals with greater exposure to conflict had systematically worse educational performance. External migrants now living in BiH have better educational and economic outcomes than those who did not migrate, but these advantages are smaller for individuals who were forced to move. In Croatia, those who moved during the conflict have worse educational outcomes, but there is a steady convergence between refugees and non-migrants. This research suggests that policies intended to address migration-related discrepancies should be targeted on the basis of individual and family experiences caused by conflict.
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Does Working at a Start-up Pay Off?
Daniel Fackler, Lisa Hölscher, Claus Schnabel, Antje Weyh
Small Business Economics,
No. 4,
2022
Abstract
Using representative linked employer-employee data for Germany, this paper analyzes short- and long-run differences in labor market performance of workers joining start-ups instead of incumbent firms. Applying entropy balancing and following individuals over ten years, we find huge and long-lasting drawbacks from entering a start-up in terms of wages, yearly income, and (un)employment. These disadvantages hold for all groups of workers and types of start-ups analyzed. Although our analysis of different subsequent career paths highlights important heterogeneities, it does not reveal any strategy through which workers joining start-ups can catch up with the income of similar workers entering incumbent firms.
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Exposure to Conflict, Migrations and Long-run Education and Income Inequality: Evidence from Bosnia and Herzegovina
Adnan Efendic, Dejan Kovač, Jacob N. Shapiro
Abstract
We investigate the long-term relationship between conflict-related migration and individual socioeconomic inequality. Looking at the post-conflict environment of Bosnia and Herzegovina (BiH), a former Yugoslav state most heavily impacted by the conflicts of the early 1990s, the paper focuses on differences in educational performance and income between four groups: migrants, internally displaced persons, former external migrants, and those who did not move. The analysis leverages a municipality-representative survey (n≈6,000) that captured self-reported education and income outcomes as well as migration histories. We find that individuals with greater exposure to conflict had systematically worse educational performance and lower earnings two decades after the war. Former external migrants now living in BiH have better educational and economic outcomes than those who did not migrate, but these advantages are smaller for individuals who were forced to move. We recommend that policies intended to address migration-related discrepancies should be targeted on the basis of individual and family experiences caused by conflict.
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The (Heterogenous) Economic Effects of Private Equity Buyouts
Steven J. Davis, John Haltiwanger, Kyle Handley, Josh Lerner, Ben Lipsius, Javier Miranda
Abstract
The effects of private equity buyouts on employment, productivity, and job reallocation vary tremendously with macroeconomic and credit conditions, across private equity groups, and by type of buyout. We reach this conclusion by examining the most extensive database of U.S. buyouts ever compiled, encompassing thousands of buyout targets from 1980 to 2013 and millions of control firms. Employment shrinks 13% over two years after buyouts of publicly listed firms – on average, and relative to control firms – but expands 13% after buyouts of privately held firms. Post-buyout productivity gains at target firms are large on average and much larger yet for deals executed amidst tight credit conditions. A post-buyout tightening of credit conditions or slowing of GDP growth curtails employment growth and intra-firm job reallocation at target firms. We also show that buyout effects differ across the private equity groups that sponsor buyouts, and these differences persist over time at the group level. Rapid upscaling in deal flow at the group level brings lower employment growth at target firms.
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The Place-based Effects of Police Stations on Crime: Evidence from Station Closures
Sebastian Blesse, André Diegmann
Journal of Public Economics,
March
2022
Abstract
Many countries consolidate their police forces by closing down local police stations. Police stations represent an important and visible aspect of the organization of police forces. We provide novel evidence on the effect of centralizing police offices through the closure of local police stations on crime outcomes. Combining matching with a difference-in-differences specification, we find an increase in reported car theft and burglary in residential properties. Our results are consistent with a negative shift in perceived detection risks and are driven by heterogeneous station characteristics. We can rule out alternative explanations such as incapacitation, crime displacement, and changes in police employment or strategies at the regional level. We argue that criminals are less deterred due to a lower visibility of the local police.
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The Impact of Active Aggregate Demand on Utilisation-adjusted TFP
Konstantin Gantert
IWH Discussion Papers,
No. 9,
2022
Abstract
Non-clearing goods markets are an important driver of capacity utilisation and total factor productivity (TFP). The trade-off between goods prices and household search effort is central to goods market matching and therefore drives TFP over the business cycle. In this paper, I develop a New-Keynesian DSGE model with capital utilisation, worker effort, and expand it with goods market search-and-matching (SaM) to model non-clearing goods markets. I conduct a horse-race between the different capacity utilisation channels using Bayesian estimation and capacity utilisation survey data. Models that include goods market SaM improve the data fit, while the capital utilisation and worker effort channels are rendered less important compared to the literature. It follows that TFP fluctuations increase for demand and goods market mismatch shocks, while they decrease for technology shocks. This pattern increases as goods market frictions increase and as prices become stickier. The paper shows the importance of non-clearing goods markets in explaining the difference between technology and TFP over the business cycle.
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Globalization, Productivity Growth, and Labor Compensation
Christian Dreger, Marius Fourné, Oliver Holtemöller
IWH Discussion Papers,
No. 7,
2022
Abstract
We analyze how changes in international trade integration affect productivity and the functional income distribution. To account for endogeneity, we construct a leaveout measure for international trade integration for country-industry pairs using international input-output tables. Our findings corroborate on the country-industry level that international trade integration increases productivity. Moreover, we show that both trade in intermediate inputs and trade in value added is associated with lower labor shares in emerging markets. For advanced countries, we document a positive effect of trade in value added on the labor share of income. Further, we show that the effects on productivity and labor share are heterogeneous across different sectors. Finally, we discuss the implications of our results for a possible throwback in international trade integration due to experiences from recent crises.
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External Social Networks and Earnings Management
Ming Fang, Bill Francis, Iftekhar Hasan, Qiang Wu
British Accounting Review,
No. 2,
2022
Abstract
Using a sample of U.S. listed firms for the 2000–2017 period, we examine how external social networks of top executives and directors affect earnings management in their firms. We find that well-connected firms are more aggressive in managing earnings through both accruals and real activities and that the results are robust after controlling for internal executive social ties. Using a difference-in-differences approach, we find that earnings management decreases after a socially connected executive or director dies. Additional analysis shows that connections forged by past professional working experiences have a greater impact on earnings management than connections forged by education and other social activities. Moreover, CFO social networks have a greater influence on earnings management than CEO social networks. Finally, we explore the underlying mechanisms, finding that 1) firms that are socially connected to each other show more similarities in their earnings management than firms that do not share a connection, and 2) more connected firms are less likely to incur accounting restatements. Collectively, our findings indicate that the external social networks of top executives and directors are important determinants of both their accrual- and real activity-based earnings management.
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Gender, Credit, and Firm Outcomes
Manthos D. Delis, Iftekhar Hasan, Maria Iosifidi, Steven Ongena
Journal of Financial and Quantitative Analysis,
No. 1,
2022
Abstract
Small and micro enterprises are usually majority-owned by entrepreneurs. Using a unique sample of loan applications from such firms, we study the role of owners’ gender in bank credit decisions and post-credit-decision firm outcomes. We find that, ceteris paribus, female entrepreneurs are more prudent loan applicants than are males, since they are less likely to apply for credit or to default after loan origination. The relatively more aggressive behavior of male applicants pays off, however, in terms of higher average firm performance after loan origination.
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