Firm heterogeneity and lobbying

The structure of protection across sectors is usually interpreted as the result of competition among lobbies to influence politicians, but little attention has been devoted to the importance of individual firms in this process. This paper builds a model incorporating firm heterogeneity into a lobbying setup `a la Grossman and Helpman (1994), in a monopolistic competitive environment. We obtain that increased sectorial dispersion cause a fall in equilibrium tariff provided that the exporter’s cutoff is above the mean of the distribution. Also, higher average productivity brings about a fall in the equilibrium tariff, whereas an increase in export costs cause an increase in the tariff. JEL Classification codes: D43, D7, F12, F13, L11

Debt composition and exchange rate balance sheet effects in Brazil: A firm level analysis

In this paper we study the interaction between macroeconomic environment and firms’ balance sheet effects in Brazil during the 1990’s. We start by assessing the influence of macroeconomic conditions on firms’ debt composition in Brazil. We found that larger firms tend to change debt currency composition more in response to a change in the exchange rate risk than small firms. We then proceed to investigate if and how exchange rate balance sheet effects affected the firms’ investment decisions. We test directly the exchange rate balance sheet effect on investment. Contrary to earlier findings (Bleakley and Cowan, 2002), we found that firms more indebted in foreign currency tend to invest less when there is an exchange rate devaluation. We tried different controls for the competitiveness effect. First, we control directly for the effect of the exchange rate on exports and imported inputs. We then pursue an alternative investigation strategy, inspired by the credit channel literature. According to this perspective, Tobin’s q can provide an adequate control for the competitiveness effect on investment. Our results provide supporting evidence for imperfect capital markets, and for a negative exchange rate balance sheet effect in Brazil. The results concerning the exchange rate balance sheet effect on investment are statistically significant and robust across the different specifications. We tested the results across different periods, classified according to the macroeconomic environment. Our findings suggest that the negative exchange rate balance sheet effect we found in the whole sample is due to the floating exchange rate period. We also found that exchange rate devaluations have important negative impact on both cash flows and sales of indebted firms. Furthermore, the impact of exchange rate variations is asymmetric, and the significant effect detected when no asymmetry is imposed is engendered by exchange rate devaluations.

Knowledge effect on firm performance in manufacturing and service firms

This thesis seeks to examine the difference between manufacturing and service firms with respect to the effects of knowledge on performance, and the influence of market turbulence in this relationship. Empirical data, resulting from a survey, was collected from more than 1,206 firms, involving several sectors. Two samples were analyzed, one with 334 manufacturing and other with 509 service firms. The findings indicate no significant difference in the importance of knowledge on performance between these sectors in the absence of market turbulence: knowledge development (KD) has a stronger effect than culture of competitiveness (CC) on firm performance. However, under market turbulence, manufacturers differ from service providers. The positive effect of KD is enhanced, while the positive effect of CC remains the same for manufacturing firms. On the other hand, the positive effect of KD is diminished, while the positive effect of CC is enhanced for service firms. This supports the argument concerning differences in the nature of manufacturing and service industries. From a managerial point of view, results confirm the importance of knowledge, irrespective of firm sector or market turbulence. However, while industrial firms should center efforts on KD, service firms must find a balance where knowledge development (e.g. norms, processes, routines) does not impair their culture of competitiveness (e.g. learning, innovation, action). The thesis contributes to existing literature by proposing that: (1) the positive effect of knowledge on performance is confirmed; (2) under turbulent markets manufacturing and service firms have different responses concerning the influence of knowledge on performance; (3) a multidimensional performance construct based on cost, profitability, and growth is an interesting way to evaluate firm sustained competitive advantage, rather than one-dimensional constructs; (4) the CC x KD interaction, found relevant for supply chains in previous studies, is not supported for firms; (5) differences in unit of analysis, e.g. from supply chains to firms, result in different effects of KD and CC on firm performance; (6) existing scales can be improved with the addition of more diverse indicators, capturing a wider range of concepts (e.g. information transfer measurement); and (7) results from previous studies are supported for Brazilian firms, contributing for theory generalization.

The value of local partners in Brazil: the effects of ownership clusters and business group membership on firm value in emerging markets

Este estudo analisa como a classe de acionistas afeta o valor das empresas brasileiras listadas na bolsa de valores no ponto de vista da governança corporativa. O trabalho examina a interação entre o valor das empresas e cinco tipos de concentrações acionárias comumente presente em mercados emergentes: famílias, agentes públicos, investidores estrangeiros, executivos e investidores financeiros nacionais. A análise empírica demonstra que o mix e a concentração de participação acionária afeta significativamente o valor das empresas. Utilizando uma compilação única de dados em painel de 2004 a 2008, a presente pesquisa também desenvolve hipóteses sobre o efeito da participação em grupos econômicos para o valor das empresas. A investigação encontra evidências de que, apesar de sua importância para o desenvolvimento de empresas brasileiras, o capital familiar, instituições públicas, e investidores estrangeiros estão cedendo lugar a monitores mais especializados e menos concentrados, como executivos e instituições financeiras nacionais. Estes resultados indicam que a governança corporativa no Brasil pode estar alcançando níveis de maturidade mais elevados. Adicionalmente, apesar de não haver indicação da existência de correlação entre a participação em grupos econômicos e o valor das empresas, os resultados indicam que a presença de um tipo específico de acionista em uma empresa do grupo facilita investimentos futuros desta classe de acionista em outras empresas do mesmo grupo, sinalizando que os interesses acionários são provavelmente perpetuados dentro de uma mesma rede de empresas. Finalmente, a pesquisa demonstra que enquanto o capital familiar prefere investir em empresas com ativa mobilidade do capital, investidores internacionais e instituições públicas procuram investimentos em equity com menor mobilidade de capital, o que lhes garante mais transparência com relação ao uso dos recursos e fundos das empresas.

The best are never normal : exploring the distribution of firm performance

Competitive Strategy literature predicts three different mechanisms of performance generation, thus distinguishing between firms that have competitive advantage, firms that have competitive disadvantage or firms that have neither. Nonetheless, previous works in the field have fitted a single normal distribution to model firm performance. Here, we develop a new approach that distinguishes among performance generating mechanisms and allows the identification of firms with competitive advantage or disadvantage. Theorizing on the positive feedback loops by which firms with competitive advantage have facilitated access to acquire new resources, we proposed a distribution we believe data on firm performance should follow. We illustrate our model by assessing its fit to data on firm performance, addressing its theoretical implications and comparing it to previous works.

The effects of small firm tax incentives on employment levels

This paper aims to evaluate the impact on employment growth of a tax incentive program targeting Brazilian manufacturing small businesses (SIMPLES). This evaluation is conducted for two distinct periods: for the year 1997, when the program was first implemented, and for the year 1999, when the eligibility rule was modified to allow the eligibility of a broader group of firms. The evaluation takes into account two distinct channels through which the charted effects operate. The first is the employment variation in the firms that became eligible for the incentives, and the second is the change in the survival probability experienced by the same group of firms. Moreover, each of these channels can be activated either by the tax reduction dimension of the program or by its dimension of red tape simplification. Our results identify positive effects on employment growth for the tax incentive program only in the dimension of red tape simplification and its effects on the 1997 sample.

The firm size wage premium : a quantile analysis

Empirical evidence shows that larger firms pay higher wages than smaller ones. This wage premium is called the firm size wage effect. The firm size effect on wages may be attributed to many factors, as differentials on productivity, efficiency wage, to prevent union formation, or rent sharing. The present study uses quantile regression to investigate the finn size wage effect. By offering insight into who benefits from the wage premi um, quantile regression helps eliminate and refine possible explanations. Estimated results are consistent with the hypothesis that the higher wages paid by large firms can be explained by the difference in monitoring costs that large firms face. Results also suggest that more highly skilled workers are more often found at larger firms .

The effects of credit risk transfer on bank monitoring and firm financing

This paper examines the efects of the transfer of credit risk associated with bank loans. We are interested in (a) whether the transfer of credit risk has any impact on the intensity with which banks monitor their borrowers and (b) whether credit risk transfer infuences the amount of financing that is provided to firms in an economy. Our model first develops conditions under which bank finance is available to firrms, mainly in the spirit of Holmstrom/Tirole (1997). We then introduce projects with uncorrelated pay-offs and argue that one possible economic rationale for credit risk transfer is diversi¯cation. We analyze whether and how within this scenario the transfer of the credit risk of loans changes a bank's incentives to monitor its debtors. Finally we investigate whether and what kind of impact this may have on the amount of ¯nancing available to firms in an economy. Our results indicate that the monitoring incentives are being eroded indeed and that credit risk transfer can increase the overall amount of obtainable funds in an economy.

Firm financial constraints and the impact of monetary policy: evidence from financial conglomerates

Building on recent evidence on the functioning of internal capital markets in financial conglomerates, this paper conducts a novel test of the balance sheet channel of monetary policy. It does so by comparing monetary policy responses of small banks that are affiliated with the same bank holding company, and this arguably face similar constraints in accessing internal/external sources of funds, but that operate in different geographical regions, and thus face different pools of borrowers. Because these subsidiaries typically concentrate their lending with small local businesses, we can use cross-sectional differences in state-level economic indicators at the time of changes of monetary policy to study whether or not the strength of borrowers' balance sheets influences the response of bank lending. We find evidence that the negative response of bank loan growth to a monetary contraction is significantly stronger when borrowers have 'weak balance sheets. Our evidence suggests that the monetary authority should consider the amplification effects that financial constraints play following changes in basic interest rates and the role of financial conglomerates in the transmission of monetary policy.

Main obstacles in the business environment affecting firm growth: a comparative analysis between Chinese and Brazilian SMEs

Usando dados do Banco Mundial, esta dissertação analisa as semelhanças e diferenças entre os obstáculos enfrentados pelas micro, pequenas e médias empresas (MSME) no Brasil e na China. Realizamos tanto uma análise comparativa entre os dos países como uma análise de clusters para confrontar os dados subjetivos e objetivos recolhidos, de modo a identificar o desempenho das empresas, levando em consideração as características dos países e o ambiente de negócios.

Not delivering as one: asymmetric outcomes in firm-university collaborations

Extant literature examined the benefits of relational embeddedness in facilitating collaboration between organizations, as well as the necessity of firms to balance their knowledge generation into exploration and exploitation activities. However, the effects of relational embeddedness in the specific outputs of firm-university collaborations, as well as the elements that affect the exploratory nature of such outcomes remain underexplored. By examining fine grained data of more than 4.000 collaborative research and development projects by a firm and universities, 5.000 patents, and 300.000 scientific publications, it was proposed that relational embeddedness would have a positive effect on resource commitment and on joint scientific publications, but a negative effect on joint patents and exploratory outcomes resulting of such collaborations. Additionally, it was proposed that knowledge similarity would have a negative impact in exploratory endeavors made in such projects. Although some of the propositions were not supported by the data, this study revealed that relational embeddedness increases resource commitment and the production of joint scientific publications in such partnerships. At last, this study presents interesting opportunities for future research.

Bank networks and firm credit: an agent based model approach

Starting from the idea that economic systems fall into complexity theory, where its many agents interact with each other without a central control and that these interactions are able to change the future behavior of the agents and the entire system, similar to a chaotic system we increase the model of Russo et al. (2014) to carry out three experiments focusing on the interaction between Banks and Firms in an artificial economy. The first experiment is relative to Relationship Banking where, according to the literature, the interaction over time between Banks and Firms are able to produce mutual benefits, mainly due to reduction of the information asymmetry between them. The following experiment is related to information heterogeneity in the credit market, where the larger the bank, the higher their visibility in the credit market, increasing the number of consult for new loans. Finally, the third experiment is about the effects on the credit market of the heterogeneity of prices that Firms faces in the goods market.