Does the Chinese banking system promote the growth of firms?

Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China's industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.

Examining a key aspect of agency-to-business relationships:the effects of regulatory control on the satisfaction of regulated firms

This paper studies an overlooked, but highly important relationship, the relationship that exists between regulatory agencies (e.g., the EPA, OSHA, and the FDA) and the for-profit businesses they attempt to govern. Drawing on business-to-business control and satisfaction research, a framework is developed to understand how regulatory control influences the satisfaction levels of customer firms. Regulatory control is disaggregated into four distinct facets: the controlling agency, the rules and regulations of control, the processes used by the agency to apply the regulations, and sanctions. Each facet is hypothesized to have an effect on satisfaction. A regulator's administration of state food safety regulations provides the empirical context for testing the hypotheses. Results from a survey of 173 restaurants provide empirical support for the conceptual model. Most importantly, the study finds that the informal control process increases customer satisfaction, while the formal control process decreases customer satisfaction. We discuss how these and other findings may contribute to more effective agency-to-business relationships and ongoing research.

Mixing the grant cocktail:towards an understanding of the outcomes of financial support to small firms

One of the key policy objectives of government at national and regional level, is to overcome the constraints preventing local industry achieving greater competitiveness in the international market-place. This paper examines the impact of grant assistance to Northern Ireland small firms delivered over the period 1994 ^ 97 by the former Local Enterprise Development Unit through its Growth Business Support Programme (GBSP). Previous work by the authors showed that there was some tentative evidence to suggest a link between employment growth and grant aid provided to very small firms (fewer than 10 employees) assisted under the GBSP. The central objective of the empirical work reported in this paper is to extend the previous analysis by understanding the extent to which the value of financial assistance influences growth (employment, turnover, and productivity measures) and if differential impacts arise depending on the nature and timing (lag structures) of the grant assistance.

Evaluating the additionality of public sector assistance to Irish firms: a question of ownership?

This article presents an innovative approach to estimating the additionality of financial assistance awarded to firms by an Irish regional development agency. The 'self assessment approach' is used to derive estimates of deadweight and displacement for firms in the Shannon region of Ireland. Irish studies have derived high estimates of deadweight by international standards. In light of this, and the fact that successive Irish governments have placed emphasis on Foreign Direct Investment as an engine for growth, the primary objective here is to address the question of whether the type of firm ownership matters with respect to resulting deadweight and/or displacement estimates. The latter question is addressed using logistic regression analysis to test whether, ceteris paribus, firm ownership is a key-determining factor for estimates of deadweight and/or displacement. The results show that ownership does not matter in the case of deadweight, but regarding displacement there are differences between indigenous and foreign-owned firms albeit at very low levels. More precisely, as expected, indigenously owned firms are more likely to lead to higher estimates of displacement.

Earnings behaviour of financially distressed firms:The role of institutional ownership

Using a sample of 859 U.S. bankruptcy-filing firms over the period 1986-2004, we examine the earnings behaviour of managers during the distressed period by looking at sources of abnormal accruals prior to the bankruptcy-filing year. Results show that managers of highly distressed firms shift earnings downwards prior to the bankruptcy filing. We test and provide evidence in support of two potential contributing factors. First, top-level management turnover among distressed firms leads new managers to earnings bath choices during the distressed period. Second, qualified audit opinions exert pressure on managers to follow more conservative earnings behaviour during the distressed period. Evidence is also provided that the management of distressed firms with lower (higher) institutional ownership has greater (lesser) tendency to manage earnings downwards. Results also show that higher institutional ownership mitigates the negative abnormal returns of firms with top management turnover. To the authors' knowledge, this is the first study that attempts to examine whether institutional ownership relates to market reaction in conjunction with a top management turnover or a qualified audit opinion during the distressed period. Prior studies focused on the investigation of earnings management or institutional ownership (separately) during the distressed period, but did not examine if the effect of institutional ownership on earnings behaviour also influences subsequent returns. Thus, the results of this study should be of interest to analysts, standard setters and regulatory bodies since our results show that management turnover, qualified audit opinions and firm governance mechanisms affect the quality of earnings and the level of abnormal returns. © 2007 Accounting Foundation, The University of Sydney.

Managerial discretion in distressed firms

This study examines the earnings management behaviour of 455 distressed US firms that filed for bankruptcy during the period 1986-2001. We examine (a) possible earnings management during the years prior to bankruptcy-filing, (b) whether qualified audit opinions cause conservative earnings management behaviour, (c) whether earnings management differs between firms that discontinued operations and firms that survived thereafter, and (d) the effect of earnings management on subsequent stock returns. Our results are consistent with downwards earnings management 1 year prior to the bankruptcy-filing. Results also show that (a) firms receiving unqualified audit opinions 4 or 5 years prior to the bankruptcy-filing event manage earnings upwards in subsequent years, consistent with Rosner [2003. Earnings manipulation in failing firms. Contemporary Accounting Research 20, 361-408], (b) more conservative earnings management seems to be related to the qualified audit opinions rendered in the preceding year, (c) firms with long-term negative accruals the year of bankruptcy-filing have a greater chance to survive thereafter, and (d) more pronounced (negative) earnings management is associated with more negative (next year's) subsequent returns. © 2007 Elsevier Ltd. All rights reserved.

Executive pay, tournaments and corporate performance in UK firms

Recent initiatives for modernising local government have ignored the potential contribution of parish and town councils. This article critically examines English parish and town councils in the context of the current debate about the need for government to be more responsive to community needs. It considers measures to enhance the capacity of these grassroots councils by recalibrating the responsibilities and resources between tiers of local government. It concludes by setting out possible reforms to facilitate the contribution of these local councils to the modernising agenda as both representatives of the community and potential providers of local services.

The determinants of firms' performance:can finance constraints improve technical efficiency?

This paper analyses the mechanisms through which binding finance constraints can induce debt-constrained firms to improve technical efficiency to guarantee positive profits. This hypothesis is tested on a sample of firms belonging to the Italian manufacturing. Technical efficiency scores are computed by estimating parametric production frontiers using the one stage approach as in Battese and Coelli [Battese, G., Coelli, T., 1995. A model for technical efficiency effects in a stochastic frontier production function for panel data. Empirical Economics 20, 325-332]. The results support the hypothesis that a restriction in the availability of financial resources can affect positively efficiency. © 2004 Elsevier B.V. All rights reserved.

Analysis of productivity differences among foreign and domestic firms:evidence from Germany

This paper presents differences in firm-level total factor productivity (TFP) across 22 manufacturing and 17 service industries in Germany over the period 1995–2004. It is an attempt to study whether and to what extent foreign multinational enterprises (MNEs) are more productive relative to German firms. As well as distinguishing between foreign and domestic firms, we also distinguish between German MNEs and domestic firms that do not have any foreign presence. Controlling for endogeneity through semi-parametric techniques, our findings indicate considerable heterogeneity in firm performance across types of firms. The foreign/domestic distinction is not as clear cut as has been suggested elsewhere; multinationality is important in explaining productivity differences rather than foreignness.

The innovation value chain in new technology based firms:evidence from the UK

We present the first innovation value chain analysis for a representative sample of new technology based firms (NTBFs) in the UK. This involves determining which factors lead to the usage of different knowledge sources and the relationships that exist between those sources of knowledge; the effect that each knowledge source has on innovative activity; and how innovation outputs affect the performance of NTBFs. We find that internal and external knowledge sources are complementary for NTBFs, and that supply chain linkages have both a direct and indirect effect on innovation. NTBFs’ skill resources matter throughout the innovation value chain, being positively associated with external knowledge linkages and innovation success, and also having a direct effect on growth independent of the effect on innovation. Exporting matters for performance, but not through any effect on innovation.

R&D, innovation and exporting:evidence from UK new technology based firms

We examine the relationship between R&D, innovation and exporting for a sample of new technology based firms (NTBFs) in the UK. Allowance is made for selection bias and for endogeneity between innovation and exporting. Innovators are more likely to export, but conditional on entering export markets successful innovation does not increases subsequent export intensity. Lagged productivity is strongly associated with exporting, supporting the view that efficient firms are better able to overcome the barriers to entering export markets. We also find strong evidence of the importance of internal R&D and of supply-chain collaborations in fostering innovation, and that formal commercial collaborations can be important in overcoming the (information) sunk costs of entering export markets. The use of e-commerce does nothing to boost entry into export markets, but the intensity of its use is associated with increased export intensity.