Do Local Banking Market Structures Matter for SME Financing and Performance? New Evidence from an Emerging Economy
Iftekhar Hasan, Krzysztof Jackowicz, Oskar Kowalewski, Łukasz Kozłowski
Journal of Banking and Finance,
2017
Abstract
This paper investigates the relationship between local banking structures and SMEs’ access to debt and performance. Using a unique dataset on bank branch locations in Poland and firm-, county-, and bank-level data, we conclude that a strong position for local cooperative banks facilitates access to bank financing, lowers financial costs, boosts investments, and favours growth for SMEs. Moreover, counties in which cooperative banks hold a strong position are characterized by a more rapid pace of new firm creation. The opposite effects appear in the majority of cases for local banking markets dominated by foreign-owned banks. Consequently, our findings are important from a policy perspective because they show that foreign bank entry and industry consolidation may raise valid concerns for SME prospects in emerging economies.
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Decision-making Power in Foreign Subsidiaries and Its Effect on Financial Constraints: An Analysis for Selected European Transition Economies on the Basis of the IWH FDI Micro Database 2013
Andrea Gauselmann, Felix Noth
Eastern European Economics,
No. 6,
2016
Abstract
This article analyzes whether the distribution of decision-making power between the headquarters and foreign subsidiaries of multinational enterprises (MNEs) affects the foreign affiliates’ financial constraints. The findings show that not much decision-making power has as yet been moved from headquarters to foreign subsidiaries in European post-transition economies. The high concentration of decision-making power within the MNE’s subsidiary points toward higher financial constraints. However, a nonlinear effect is found, which suggests that financial constraints within the subsidiary only increase with more decision-making power when the power granted to the subsidiary is at a low level. For subsidiaries that already have autonomy in decision-making, granting more power in this regard has no effect on financial constraints.
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Regional Capital Flows and Economic Regimes: Evidence from China
Liuchun Deng, Boqun Wang
Economics Letters,
April
2016
Abstract
Using provincial data from China, this paper examines the pattern of capital flows in relation to the transition of economic regimes. We show that fast-growing provinces experienced less capital inflows before the large-scale market reform, contrary to the prediction of the neoclassical growth theory. As China transitioned from the central-planning economy to the market economy, the negative correlation between productivity growth and capital inflows became much less pronounced. From a regional perspective, this finding suggests domestic institutional factors play an important role in shaping the pattern of capital flows.
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Burdett–Mortensen Model of on-the-Job Search with Two Sectors
Florian Hoffmann, Shouyong Shi
Review of Economic Dynamics,
Special Issue in Honor of Dale Mortensen
2016
Abstract
The focus of this paper is on the steady state of a two-sector economy with undirected search where employed and unemployed workers can search for jobs, both within a sector and between the sectors. As in the one-sector model, on-the-job search generates wage dispersion among homogeneous workers. The analysis of the two-sector model uncovers a property called constant tension that is responsible for analytical tractability. We characterize the steady state in all cases with constant tension. When time discounting vanishes, constant tension yields the endogenous separation rate in each sector as a linear function of the present value for a worker. The one-sector economy automatically satisfies constant tension, in which case the linear separation rate implies that equilibrium offers of the worker value are uniformly distributed. Constant tension also has strong predictions for worker transitions and value/wage dispersion, both within a sector and between the two sectors. When constant tension does not hold, we compute the steady state numerically and illustrate its properties.
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Financial Constraints on Growth: Comparing the Balkans to Other Transition Economies
Hubert Gabrisch
Eastern European Economics,
No. 4,
2015
Abstract
This article applies an adjusted growth diagnostic approach to identify the currently most binding constraint on financing growth in the West Balkan countries. Since this group of economies faces both structural and systemic transformation problems, the original supply-side approach might not be sufficient to detect the most binding constraint. The results of the analysis indicate that the binding constraint on credit and investment growth in the region is the high and increasing share of nonperforming loans, primarily in the household sector, due to policy failures. This article compares the Balkan countries to a group of advanced transition economies. Single-country and panel regressions indicate that demand-side factors do not play a constraining role on growth in the West Balkan countries, but they do in the advanced transition economies.
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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,
No. 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.
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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.
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Corporate Governance Structures and Financial Constraints in Multinational Enterprises – An Analysis in Selected European Transition Economies on the Basis of the IWH FDI Micro Database 2013 –
Andrea Gauselmann, Felix Noth
IWH Discussion Papers,
No. 3,
2015
Abstract
In our analysis, we consider the distribution of decision power over financing and investment between MNEs’ headquarters and foreign subsidiaries and its influence on the foreign affiliates’ financial restrictions. Our research results show that headquarters of multinational enterprises have not (yet) moved much decision power to their foreign subsidiaries at all. We use data from the IWH FDI Micro Database which contains information on corporate governance structures and financial restrictions of 609 enterprises with a foreign investor in Hungary, Poland, the Czech Republic, Slovakia, Romania and East Germany. We match data from Bureau van Dijk’s AMADEUS database on financial characteristics. We find that a high concentration of decision power within the MNE’s headquarter implicates high financial restrictions within the subsidiary. Square term results show, however, that the effect of financial constraints within the subsidiary decreases and finally turns insignificant when decision power moves from headquarter to subsidiary. Thus, economic policy should encourage foreign investors in the case of foreign acquisition of local enterprises to leave decision power within the enterprise and in the case of Greenfield investment to provide the newly established subsidiaries with as much power over corporate governance structures as possible.
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Interrelationship between Industrial and Innovation Development in East Germany
Gerhard Heimpold
Region: Ekonomika i Soziologija,
No. 2,
2015
Abstract
The article demonstrates that the most important reason for the slowdown and stagnation of economic convergence in East Germany is the weakness in terms of research and development and innovation. It analyzes the interrelationship between industrial and innovative development in the East German federal states since 1990. The article shows how the East German industry sector and its R&D activities looked like in the late 1980s and which transition it had undergone in the course of privatization. The industrial development of the new federal states after 1990 is analyzed. The paper reveals structural shortcomings in East Germany's economy and considers their impact on the progress in R&D.
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Post-transition Regions as Locations for Foreign Direct Investment of Multinational Enterprises
Andrea Gauselmann
Hochschulschrift, Online-Publikation,
2014
Abstract
Multinational enterprises invest abroad to tap into location-specific advantages and to enhance their own competitiveness. At the same time, they increase productivity and industrial up-grading in the region of location and can be considered agents of technological and economic development. The aim of the thesis is to contribute to current research by investigating, which determinants and motives influence foreign investors to locate in European post-transition economies, how they appraise the quality of location factors on-site and under which conditions a knowledge and technology transfer takes place between the foreign owned firm and domestic firms, thereby leading to a better understanding of what is the impact and benefit of foreign investment in these regions.
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