Suppliers as Liquidity Insurers
Reint E. Gropp, Daniel Corsten, Panos Markou
IWH Discussion Papers,
No. 8,
2017
Abstract
We examine how financial constraints in portfolios of suppliers affect cash holdings at the level of the customer. Utilizing a data set of private and public French companies and their suppliers, we show that customers rely on their financially unconstrained suppliers to provide them with backup liquidity, and that they stockpile approximately 10% less cash than customers with constrained suppliers. This effect persisted during the global financial crisis, highlighting that suppliers may be viable insurers of liquidity even when financing from banks and other external channels is unavailable. We further show that customers with unconstrained suppliers also simultaneously receive more trade credit; that the reduction in cash holdings is greater for firms with stronger ties to their unconstrained suppliers; and that customers reduce their cash holdings following a significant relaxation in their suppliers’ financial constraints through an IPO. Taken together, the results provide important nuance regarding the implications of supplier portfolios and financial constraints on firm liquidity management.
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15.02.2017 • 11/2017
Presseeinladung: „Von der Transformation zur Europäischen Integration: Wachstumsfaktor Bildung besser nutzen“
Unter dem Titel „Von der Transformation zur Europäischen Integration: Wachstumsfaktor Bildung besser nutzen“ wird das Leibniz-Institut für Wirtschaftsforschung Halle (IWH) am Mittwoch, dem 22. Februar 2017 gemeinsam mit Wissenschaftlerinnen und Wissenschaftlern aus mit dem IWH vernetzten Instituten und Universitäten Forschungsergebnisse zu verschiedenen Aspekten des Wachstumsfaktors Bildung präsentieren.
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Einkommensverluste nach Arbeitsplatzverlusten: Kompensation vor allem durch staatliche Umverteilung
Daniel Fackler, Eva Hank
Wirtschaft im Wandel,
No. 6,
2016
Abstract
Zahlreiche Studien zeigen, dass unfreiwillige Arbeitsplatzverluste zu hohen und langfristigen Einkommensverlusten bei betroffenen Arbeitnehmern führen. Die vorliegende Studie verwendet Befragungsdaten des Sozio-oekonomischen Panels (SOEP), um erstmals umfassend zu untersuchen, ob und in welchem Ausmaß Verluste im individuellen Arbeitseinkommen durch alternative Einkommensquellen, Reaktionen anderer Haushaltsmitglieder und durch staatliche Umverteilung ausgeglichen werden. Die Ergebnisse zeigen, dass Verdienstverluste vor allem durch staatliche Umverteilung kompensiert werden, wohingegen andere Kanäle nur eine untergeordnete Rolle spielen. Ein Vergleich internationaler empirischer Evidenz zu den Verdienstausfällen nach Arbeitsplatzverlusten spricht nicht dafür, dass staatliche Umverteilung den Anreiz, Verluste durch eigene Anstrengungen selbst auszugleichen, vermindert.
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The Forward-looking Disclosures of Corporate Managers: Theory and Evidence
Reint E. Gropp, Rasa Karapandza, Julian Opferkuch
IWH Discussion Papers,
No. 25,
2016
Abstract
We consider an infinitely repeated game in which a privately informed, long-lived manager raises funds from short-lived investors in order to finance a project. The manager can signal project quality to investors by making a (possibly costly) forward-looking disclosure about her project’s potential for success. We find that if the manager’s disclosures are costly, she will never release forward-looking statements that do not convey information to external investors. Furthermore, managers of firms that are transparent and face significant disclosure-related costs will refrain from forward-looking disclosures. In contrast, managers of opaque and profitable firms will follow a policy of accurate disclosures. To test our findings empirically, we devise an index that captures the quantity of forward-looking disclosures in public firms’ 10-K reports, and relate it to multiple firm characteristics. For opaque firms, our index is positively correlated with a firm’s profitability and financing needs. For transparent firms, there is only a weak relation between our index and firm fundamentals. Furthermore, the overall level of forward-looking disclosures declined significantly between 2001 and 2009, possibly as a result of the 2002 Sarbanes-Oxley Act.
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Size of Training Firms and Cumulated Long-run Unemployment Exposure – The Role of Firms, Luck, and Ability in Young Workers’ Careers
Steffen Müller, Renate Neubäumer
Abstract
This paper analyzes how life-cycle unemployment of former apprentices depends on the size of the training firm. We start from the hypotheses that the size of training firms reduces long-run cumulated unemployment exposure, e.g. via differences in training quality and in the availability of internal labor markets, and that the access to large training firms depends positively on young workers’ ability and their luck to live in a region with many large and medium-sized training firms. We test these hypotheses empirically by using a large administrative data set for Germany and find corroborative evidence.
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Abnormal Real Operations, Real Earnings Management, and Subsequent Crashes in Stock Prices
Bill Francis, Iftekhar Hasan, Lingxiang Li
Review of Quantitative Finance and Accounting,
No. 2,
2016
Abstract
We study the impact of firms’ abnormal business operations on their future crash risk in stock prices. Computed based on real earnings management (REM) models, firms’ deviation in real operations (DROs) from industry norms is shown to be positively associated with their future crash risk. This association is incremental to that between discretionary accruals (DAs) and crash risk found by prior studies. Moreover, after Sarbanes–Oxley Act (SOX) of 2002, DRO’s predictive power for crash risk strengthens substantially, while DA’s predictive power essentially dissipates. These results are consistent with the prior finding that managers shift from accrual earnings management to REM after SOX. We further develop a suspect-firm approach to capture firms’ use of DRO for REM purposes. This analysis shows that REM-firms experience a significant increase in crash risk in the following year. These findings suggest that the impact of DRO on crash risk is at least partially through REM.
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Lessons from Schumpeterian Growth Theory
Philippe Aghion, Ufuk Akcigit, Peter Howitt
American Economic Review,
No. 5,
2015
Abstract
By operationalizing the notion of creative destruction, Schumpeterian growth theory generates distinctive predictions on important microeconomic aspects of the growth process (competition, firm dynamics, firm size distribution, cross-firm and cross-sector reallocation) which can be confronted using rich micro data. In this process the theory helps reconcile growth with industrial organization and development economics.
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Economic Failure and the Role of Plant Age and Size
Steffen Müller, Jens Stegmaier
Small Business Economics,
No. 3,
2015
Abstract
This paper introduces a large-scale administrative panel data set on corporate bankruptcy in Germany that allows for an econometric analysis of involuntary exits where previous studies mixed voluntary and involuntary exits. Approximately 83 % of all bankruptcies occur in plants with not more than 10 employees, and 61 % of all bankrupt plants are not older than 5 years. The descriptive statistics and regression analysis indicate substantial negative age dependence with respect to bankruptcy risk but confirm negative size dependence for mature plants only. Our results corroborate hypotheses stressing increasing capabilities and positional advantage, both predicting negative age dependence with respect to bankruptcy risk due to productivity improvements. The results are not consistent with the theories explaining age dependence via imprinting or structural inertia.
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What Do We Learn from Schumpeterian Growth Theory?
Philippe Aghion, Ufuk Akcigit, Peter Howitt
P. Aghion, S. N. Durlauf (eds.), Handbook of Economic Growth, Volume 2B, Amsterdam: North Holland,
2014
Abstract
Schumpeterian growth theory has operationalized Schumpeter’s notion of creative destruction by developing models based on this concept. These models shed light on several aspects of the growth process that could not be properly addressed by alternative theories. In this survey, we focus on four important aspects, namely: (i) the role of competition and market structure; (ii) firm dynamics; (iii) the relationship between growth and development with the notion of appropriate growth institutions; and (iv) the emergence and impact of long-term technological waves. In each case, Schumpeterian growth theory delivers predictions that distinguish it from other growth models and which can be tested using micro data.
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