The Impact of Delay: Evidence from Formal out-of-Court Restructuring
Stjepan Srhoj, Dejan Kovač, Jacob N. Shapiro, Randall K. Filer
Journal of Corporate Finance,
February
2023
Abstract
Different types of bankruptcy restructuring procedures are used in most legal systems to decide the fate of businesses facing financial hardship. We study how bargaining failures in an under-researched type of restructuring procedure, a formal out-of-the court procedure impacts the economic performance of participating firms. Croatia introduced a “pre-bankruptcy settlement” (PBS) process in the wake of the Great Recession of 2007–2009. A novel dataset provides us with annual financial statements for both sides of more than 180,000 debtor–creditor pairs, enabling us to address selection into failed negotiations by matching a rich set of creditor and debtor characteristics. Failures to settle at the PBS stage due to idiosyncratic bargaining problems, which effectively delay entry into the standard bankruptcy procedure, lead to a lower rate of survival among debtors as well as reduced employment, revenue, and profits. We are the first study to track how bargaining failures diffuse through the network of creditors, finding a significant negative effect on small creditors, but not others. Our results highlight the impact of delay and the importance of structuring bankruptcy procedures, to rapidly resolve uncertainty about firms’ future prospects.
Artikel Lesen
Financial Linkages and Sectoral Business Cycle Synchronization: Evidence from Europe
Hannes Böhm, Julia Schaumburg, Lena Tonzer
IMF Economic Review,
December
2022
Abstract
We analyze whether financial integration leads to converging or diverging business cycles using a dynamic spatial model. Our model allows for contemporaneous spillovers of shocks to GDP growth between countries that are financially integrated and delivers a scalar measure of the spillover intensity at each point in time. For a financial network of ten European countries from 1996 to 2017, we find that the spillover effects are positive on average and much larger during periods of financial stress, pointing towards stronger business cycle synchronization. Dismantling GDP growth into value added growth of ten major industries, we observe that spillover intensities vary significantly. The findings are robust to a variety of alternative model specifications.
Artikel Lesen
The Impact of Delay: Evidence from Formal Out-of-Court Restructuring
Randall K. Filer, Dejan Kovač, Jacob N. Shapiro, Stjepan Srhoj
Abstract
Bankruptcy restructuring procedures are used in most legal systems to decide the fate of businesses facing financial hardship. We study how bargaining failures in such procedures impact the economic performance of participating firms in the context of Croatia, which introduced a „pre-bankruptcy settlement“ (PBS) process in the wake of the Great Recession of 2007 - 2009. Local institutions left over from the communist era provide annual financial statements for both sides of more than 180,000 debtor-creditor pairs, enabling us to address selection into failed negotiations by matching a rich set of creditor and debtor characteristics. Failures to settle at the PBS stage due to idiosyncratic bargaining problems, which effectively delays entry into the standard bankruptcy procedure, leads to a lower rate of survival among debtors as well as reduced employment, revenue, and profits. We also track how bargaining failures diffuse through the network of creditors, finding a significant negative effect on small creditors, but not others. Our results highlight the impact of delay and the importance of structuring bankruptcy procedures to rapidly resolve uncertainty about firms‘ future prospects.
Artikel Lesen
Financial Linkages and Sectoral Business Cycle Synchronisation: Evidence from Europe
Hannes Böhm, Julia Schaumburg, Lena Tonzer
Abstract
We analyse whether financial integration between countries leads to converging or diverging business cycles using a dynamic spatial model. Our model allows for contemporaneous spillovers of shocks to GDP growth between countries that are financially integrated and delivers a scalar measure of the spillover intensity at each point in time. For a financial network of ten European countries from 1996-2017, we find that the spillover effects are positive on average but much larger during periods of financial stress, pointing towards stronger business cycle synchronisation. Dismantling GDP growth into value added growth of ten major industries, we observe that some sectors are strongly affected by positive spillovers (wholesale & retail trade, industrial production), others only to a weaker degree (agriculture, construction, finance), while more nationally influenced industries show no evidence for significant spillover effects (public administration, arts & entertainment, real estate).
Artikel Lesen
Networks and the Macroeconomy: An Empirical Exploration
Daron Acemoglu, Ufuk Akcigit, William R. Kerr
NBER Macroeconomics Annual,
2015
Abstract
How small shocks are amplified and propagated through the economy to cause sizable fluctuations is at the heart of much macroeconomic research. Potential mechanisms that have been proposed range from investment and capital accumulation responses in real business-cycle models (e.g., Kydland and Prescott 1982) to Keynesian multipliers (e.g., Diamond 1982; Kiyotaki 1988; Blanchard and Kiyotaki 1987; Hall 2009; Christiano, Eichenbaum, and Rebelo 2011); to credit market frictions facing firms, households, or banks (e.g., Bernanke and Gertler 1989; Kiyotaki and Moore 1997; Guerrieri and Lorenzoni 2012; Mian, Rao, and Sufi 2013); to the role of real and nominal rigidities and their interplay (Ball and Romer 1990); and to the consequences of (potentially inappropriate or constrained) monetary policy (e.g., Friedman and Schwartz 1971; Eggertsson and Woodford 2003; Farhi and Werning 2013).
Artikel Lesen
Does Country Context Distance Determine Subsidiary Decision-making Autonomy? Theory and Evidence from European Transition Economies
Gjalt de Jong, Vo. van Dut, Björn Jindra, Philipp Marek
International Business Review,
Nr. 5,
2015
Abstract
We studied an underrepresented area in the international business (IB) literature: the effect of country context distance on the distribution of decision-making autonomy across headquarters and foreign affiliates. Foreign affiliates directly contribute to the competitive advantages of multinational enterprises, highlighting the importance of such intra-firm collaboration. The division of decision-making autonomy is a core issue in the management of headquarters–subsidiary relationships. The main contribution of our paper is that we confront two valid theoretical frameworks – business network theory and agency theory – that offer contradictory hypotheses with respect to the division of decision-making autonomy. Our study is among the first to examine this dilemma with a unique dataset from five Central and Eastern European transition countries. The empirical results provide convincing support for our approach to the study of subsidiary decision-making autonomy.
Artikel Lesen
Does Country Context Distance Determine Subsidiary Decision-making Autonomy? Theory and Evidence from European Transition Economies
Gjalt de Jong, Vo. van Dut, Björn Jindra, Philipp Marek
International Business Review,
2015
Abstract
We studied an underrepresented area in the international business (IB) literature: the effect of country context distance on the distribution of decision-making autonomy across headquarters and foreign affiliates. Foreign affiliates directly contribute to the competitive advantages of multinational enterprises, highlighting the importance of such intra-firm collaboration. The division of decision-making autonomy is a core issue in the management of headquarters–subsidiary relationships. The main contribution of our paper is that we confront two valid theoretical frameworks – business network theory and agency theory – that offer contradictory hypotheses with respect to the division of decision-making autonomy. Our study is among the first to examine this dilemma with a unique dataset from five Central and Eastern European transition countries. The empirical results provide convincing support for our approach to the study of subsidiary decision-making autonomy.
Artikel Lesen
The Economic Optimality of Sanction Mechanisms in Interorganizational Ego Networks – A Game Theoretical Analysis –
Muhamed Kudic, Marc Banaszak
IWH Discussion Papers,
Nr. 15,
2009
Abstract
Even though small- and medium-sized firms (SMEs) were believed not to proceed beyond exporting in their internationalization routes, we can observe new types of co-operation intensive entrepreneurial firms – so-called “micromultinational enterprises” (mMNEs) – entering the global landscape. These firms face the challenge to manage and control a portfolio of national and international alliances simultaneously (ego network). The aim of this paper is to provide game theoretically consolidated conditions in order to analyze the effectiveness and efficiency of interorganizational sanction mechanisms in an alliance portfolio setting. A game theoretical framework is developed over three stages with increasing complexity. Results show that two out of six analyzed sanction mechanisms do not fulfill the game theoretical condition for effectiveness. The efficiency analysis sensibilizes for discretionary elements in governance structures and demonstrates that not one single sanction mechanism but rather the right choice and combination of different types of sanction mechanisms leads to efficient results. We contribute to the international business, alliance, and network literature in several ways by focusing on alliance portfolios held by mMNEs. In doing so, we move beyond the dyadic level and analyze sanction mechanisms from an ego network perspective, a still widely under-emphasized topic in the literature.
Artikel Lesen
The Role of the Intellectual Property Rights Regime for Foreign Investors in Post-Socialist Economies
Benedikt Schnellbächer, Johannes Stephan
IWH Discussion Papers,
Nr. 4,
2009
Abstract
We integrate international business theory on foreign direct investment (FDI) with institutional theory on intellectual property rights (IPR) to explain characteristics and behaviour of foreign investment subsidiaries in Central East Europe, a region with an IPR regime-gap vis-à-vis West European countries. We start from the premise that FDI may play a crucial role for technological catch-up development in Central East Europe via technology and knowledge transfer. By use of a unique dataset generated at the IWH in collaboration with a European consortium in the framework of an EU-project, we assess the role played by the IPR regimes in a selection of CEE countries as a factor for corporate governance and control of foreign invested subsidiaries, for their own technological activity, their trade relationships, and networking partners for technological activity. As a specific novelty to the literature, we assess the in influence of the strength of IPR regimes on corporate control of subsidiaries and conclude that IPR-sensitive foreign investments tend to have lower functional autonomy, tend to cooperate more intensively within their transnational network and yet are still technologically more active than less IPR-sensitive subsidiaries. In terms of economic policy, this leads to the conclusion that the FDI will have a larger developmental impact if the IPR regime in the host economy is sufficiently strict.
Artikel Lesen