Showing papers in "Eurasian Business Review in 2020"

Innovation, industry and firm age: are there new knowledge production functions?

Abstract: In this paper we investigate how the knowledge production function is at work in different industrial sectors comparing mature and young companies in Italy. We estimate a two-step model using community innovation survey data. We provide evidence that young firms are particularly effective in translating R&D into product innovation in ‘entrepreneurial sectors’ (especially in services where it is likely that capital requirements and experience are negligible), while mature companies turn out to be more effective in translating technological acquisitions (TAs) into process innovation in ‘routinized sectors’ (especially in low-tech manufacturing industries where the main strategy is cost reduction).

Board gender diversity, competitive pressure and investment efficiency in Chinese private firms

Abstract: This study investigates the impact of female directors (FDs) on investment efficiency in a competitive environment. Considering Chinese market, where corporate governance practices are weaker than other developed countries and empirical evidence regarding the role of female directors in shaping investment efficiency is absent, this study fills this gap by studying the role of the female directors in investment efficiency in a competitive environment. The results show that FDs improve the investment efficiency in the firms as they play a monitoring role, discipline the management, reduce agency problem, and improve efficient allocation of resources. The results also exhibit that FDs significantly curb the overinvestment problem. However, FDs do not play a significant role in reducing underinvestment problem. The study facilitates to understand the factors that help in efficient allocation of resources in an economy. This study can be helpful for the policymakers while devising corporate policies to promote and encourage gender diversity in higher management.

Institutions and economic change: some notes on self-organization, power and learning in human organizations

Abstract: This paper provides a compact overview of the interpretations of the “primitive entities” constituting the social fabric of economic systems according to different social science traditions. In our view, it is possible to reconstruct two meta-narratives on the origins of the theoretical primitives which are at the roots of different social sciences approaches. The first narrative argues that ‘once upon a time’ there were individuals with well-structured and coherent preferences and with adequate cognitive algorithms which allowed them to take systematically rationally consistent decisions. At the beginning of history, they met and, conditional on the technologies available, undertook mutually beneficial exchanges or, when this was not possible due to technological non-convexities, trading difficulties or problems of contract enforcement, built organizations. In the alternative tale, at the beginning of history, there were immediately factors of socialization like families and social norms, which shaped desires, representations and, possibly, cognitive abilities of the agents. In this perspective, non-exchange mechanisms of interactions (authority, violence and persuasion) which establish the adaptation of agents to specific social roles appear in the explanation from the start. Here ‘institutions’ are the primitives, while ‘preferences’ and the very idea of ‘rationality’ are derived entities. Which of the two meta-narrative is chosen bears far-reaching implications for the interpretation of institutions and organizations and their transformations.

Impacts of terrorism, governance structure, military expenditures and infrastructures upon tourism: empirical evidence from an emerging economy

Abstract: Many countries are actively pursuing tourism-oriented policies to boost their economic growth. Tourism as an essential economic activity in most countries not only generates revenue but also develops infrastructures and creates jobs and investment opportunities. Several factors can affect the tourism activities of a country. This study investigates the impacts of terrorism, governance structure, military expenditures, and physical and ICT infrastructures upon tourism in an emerging economy, Pakistan. The ARDL bounds testing approach to cointegration is applied with data for the period of 2002Q1–2016Q4. The empirical results show that terrorism, military expenditures, and physical and ICT infrastructures have adverse impacts on tourism both in the short run and in the long run. The governance structure has a positive impact on tourism. Nevertheless this impact, as well as the impact of terrorism, is not significant. The findings from Johansen cointegration and dynamic ordinary least square approaches corroborate the results. This study proposes that governance structure, and physical and ICT infrastructures be improved to promote tourism activities. It is also suggested that more effective measures rather than mere military actions be taken to curtail terrorism and develop tourism. Detailed policy implications are also discussed.

Cognitive social capital and absorptive capacity as antecedents of entrepreneurial orientation: a configurational approach

Abstract: In this study we contribute to solve a gap in the literature regarding the proposal of new determining factors of entrepreneurial orientation. Specifically, we present a configurational model to explain how entrepreneurial orientation (EO) is developed in a dynamic environment. Based on a sample of companies in the agri-food sector in Spain, this work examines how cognitive social capital and absorptive capacity (ACAP) jointly affect EO in a context of technological dynamism. The configurational approach highlights the existence of configurations or multidimensional sets of elements that are efficient when established in conjunction, as opposed to others that are detrimental to the performance of the company. In this sense, we propose that the combination of cognitive social capital with ACAP heterogeneously affects the influence of technological dynamism on EO through its potential and realized dimensions, which decrease and improve EO, respectively. Therefore, we emphasize the significance of the configurational approach in delving deeper into the connection between internal and external antecedents of EO and the importance of differentiating between potential and realized dimensions of ACAP considering their implications for EO.

What attracts multinational enterprises from the new EU member states to Poland

Abstract: The main goal of this study is to examine empirically the determinants of multinational activity of firms from the new EU-12 member states in Poland during the period 1990–2014 using the negative binomial model. In particular, we test the predictions of competing theoretical models of the multinational enterprise to identify the investment motives for undertaking foreign direct investment in Poland. In addition to traditional country-pair characteristics such as absolute and relative market size and differences in relative factor endowments, in this study we account for cultural differences between the host and partner countries that may affect the cost of foreign investment. The assembled empirical evidence points to both market access and efficiency seeking as the main reasons for undertaking foreign direct investment in Poland by multinational enterprises based in the new EU-12 member states. However, cultural proximity does not seem to be an important factor in explaining the extent of multinational activity in Poland.

Corporate cash holdings and financial crisis: new evidence from an emerging market

Abstract: A financial crisis is an exogenous shock to corporate liquidity management since it increases uncertainty and restricts firms’ access to external financing. While prior studies show that firms save more cash under precautionary motive during the crisis period, we argue that firms also consume cash for their investment projects and/or operating activities as a reaction to external financial constraint. In this paper, we argue that Vietnamese stock market, a typical emerging market, is a good laboratory to investigate corporate cash holdings under the global financial crisis since its under-developed financial system and poor investor protection make firms incur high costs of external financing. Using a sample of 5502 observations from 621 firms listed from 2007 to 2017, we find that cash-cash flow sensitivity is higher but corporate cash holdings are lower over the crisis period from 2008 to 2009. Furthermore, we also find that the effect of the financial crisis is stronger when firms are financially unconstrained. These research findings imply that firms save more cash and consume more cash due to higher uncertainty and external financial constraint caused by a financial crisis. When firms consume cash more than they save, their cash holdings are lower. Firms with low firm-specific financial constraint tend to consume more cash due to higher flexibility in their corporate liquidity management. This study helps managers understand how firms react to exogenous shock to corporate liquidity management.

Entrepreneurial intention among high-school students: the importance of parents, peers and neighbors

Abstract: Literature on the formation of intention toward entrepreneurship in adolescents has focused on either parental (vertical) transmission of social capital or network effects from peers or neighbors (horizontal). Considering the simultaneous effect of parents, peers, and neighbors, we suggest that such three levels identify a mechanism whereby the individual perception of their importance interacts with their objective characteristics. With a unique dataset for second-year high-school adolescents in the Italian city of Palermo, and employing Logit and 3SLS methods, we find evidence for a strong parental effect and for secondary peer (peers) effects on student intention. We also detect clear endogenous effects from the neighborhood and the overall context. Moreover, entrepreneurship is confirmed to be perceived, even by high-school students, as a buffer for possible unemployment and social mobility.

Self-employment as a source of income inequality

Abstract: It is well known that the self-employed are over-represented at the bottom as well as the top of the income distribution. This paper shifts the focus from the income situation of the self-employed to the distributive effects of a change in self-employment rates. With representative German data and unconditional quantile regression analysis we show that an increase in the proportion of self-employed individuals in the labor force increases income polarization by tearing down floors at the bottom and allowing higher income potentials at the very top of the hourly income distribution. Recentered influence function regression of inequality measures corroborate that self-employment is a source of income inequality in the labor market.

Uncertainty and leverage nexus: does trade credit matter?

Abstract: This study investigates how uncertainty (economic policy uncertainty, market-based uncertainty, firm-specific uncertainty, and CAPM-based uncertainty) impacts the Chinese listed firms’ capital structure for the period 1999–2016, and further tests whether this relationship varies for state-owned enterprises (SOEs) and non-SOEs. In addition, we examine the moderating effect of a non-formal financing channel (trade credit) on the relationship between leverage and uncertainty. The findings show that firms decrease the level of leverage with an increase in uncertainty, and this impact is less prominent for firms owned by the state. Furthermore, the results reveal that trade credit decreases the negative association between uncertainty and leverage, suggesting that firms (especially non-SOEs) adjust their financing demands by using trade credit under high uncertainty. The findings provide implications for corporations and policymakers about how capital structure decisions are influenced by different types of uncertainties in a firm’s environment.

Macro uncertainty, analyst performance, and managerial ability

Abstract: This paper documents the systematic and negative effects of heightened macro uncertainty on financial analyst performance and the potential for managerial ability to moderate such negative effects. Specifically, we find that macro uncertainty measures are significantly and negatively correlated with the accuracy and informativeness of analysts’ earnings forecasts and positively correlated with the dispersion of earnings forecasts. Furthermore, we find that the negative effects of macro uncertainty on analyst performance are significantly mitigated in firms with high managerial ability. Our results provide a broad overview regarding the negative effects of macro uncertainty on analyst performance and indicate that managerial ability could be a potential moderator to mitigate the negative impacts of macro uncertainty on analyst performance, which is based on the upper-echelons theory.

Determinants of consumers’ intentions to share knowledge and intentions to purchase on s-commerce sites: incorporating attitudes toward persuasion attempts into a social exchange model

Abstract: This research explores s-commerce users’ intentions to purchase and to share knowledge by incorporating ‘attitudes toward persuasion attempts,’ ‘ease of use,’ and ‘perceived usefulness’ into a social exchange theory model. A survey using an on-site purposive sampling technique was used to recruit the respondents, and an interception technique was used to approach the consumers. A total of 471 Korean consumers participated in this research. Based on 471 Korean social-commerce users, our results reveal that social exchange belief factors and a site’s usability affect user satisfaction, which subsequently affects users’ intentions to purchase and to share knowledge. In addition, attitudes toward persuasion attempts moderate the effect of satisfaction on users’ purchase intentions.

Leader–member exchange quality and employees job outcomes: a parallel mediation model

Abstract: The study proposed a parallel mediation model where the perceived organizational politics (POP) and perceived leader integrity (PLI) were underlying mechanisms through which leader–member exchange (LMX) quality translated into employee job outcomes. The proposed theoretical framework was based on relational attribution theory. We proposed that subordinates form their perceptions about organizational politics and the leader’s integrity based on their relationship quality with the leaders, which in turn leads to affective commitment, creativity, and job performance. We tested the hypothesized model using three-wave, time-lagged multi-sourced (self and peer-reported) data (N = 310) from employees of service sector organizations in Pakistan. After establishing the reliability and validity of measures, the parallel mediation model was tested. Results of regression analyses using Bootstrap confidence interval method indicated significant results showing that both POP and PLI mediate the relationship between LMX quality and all outcome variables with one exception. Limitations, implications and future research directions were discussed at the end.

Factors influencing SME owners’ continuance intention in Bangladesh: a logistic regression model

Abstract: The purpose of this paper is to identify the critical determinants of Bangladeshi small and medium-sized enterprises’ intention to continue their business. 1724 business owners participated as respondents in this survey. Using logistic regression, our results suggest that continuance intention is affected positively by innovation, informality, risk attitude, and debt. On the other hand, the age of the business owner and the size of firm do not play any significant role in this intention. The probability of continuance in the presence of each of these factors is also calculated in Manufacturing, Service, and Trade sectors separately. Understanding the influential determinants of continuance intention of business owners would help the policy makers to devise appropriate policies from a better insight to support the industry in different sectors.

Regulatory oversight and managerial ability

Abstract: This paper examines whether regulatory oversight affects managerial ability. To measure regulatory oversight, I use comment letters from two Iranian regulatory agencies. Furthermore, to measure managerial ability, I employ managerial ability-score introduced by Demerjian et al. (Management Science 58(7):1229–1248, 2012). Using a difference-in-differences design with a propensity score matching approach, I reveal that the managerial ability of a firm is enhanced following the receipt of a comment letter by the firm. I further reveal that the managerial ability of a firm is enhanced following the receipt of a comment letter by the firm’s industry peers. Collectively, the findings highlight the internalities and externalities of regulatory oversight in the context of managerial ability.

Determinants of outsourced internal audit function: a further analysis

Abstract: The aim of this study is to investigate how the board of directors, audit committee (AC), external auditor and management explain the outsourced internal audit function (IAF) practice. Although prior studies provide some insights into the determinants of IAF, we have little understanding of how their characteristics are associated with outsourced IAF. Using 767 observations from an emerging market, we find that board independence and AC accounting expertise are negatively associated with outsourced IAF. We also observe a positive association between board expertise, AC independence, CEO with accounting expertise, and the size of the external audit firm and outsourced IAF. Corroborating these findings, additional tests show that the type of outsourced IAF provider, either big4 or non-big4, plays a significant role in these associations. We also extend the recent literature on the governance role of an AC chair with accounting expertise and report that a chair with accounting expertise is associated with outsourced IAF if the provider is a big4 audit firm. These findings may serve a large number of stakeholders who are interested in audit practices in general and IAF practices in particular.

Empowering entrepreneurial capacity: training, innovation and business ethics

Abstract: Entrepreneurship's training is an issue with many gaps—even with contradictory results—, in which many aspects and the relationships between them are still unknown. This paper addresses the relationships that exist in training process and on their impact on the resultant entrepreneurial capacity. The sample includes 469 individuals interested in starting a new venture. A common method bias was addressed on the questionnaire design including psychological separation of predictor and criterion variables and response anonymity. Furthermore, a principal factor analysis on the questionnaire measurement items was carried out, without a single factor emerging. The statistical analysis was carried out by ordinal logistic regression and multinomial logistic regression. The results obtained are not a trivial issue for entrepreneurship, but rather a key aspect, which must be very present in the training stages of the entrepreneur. In fact, the emerging entrepreneur requires training in areas or capacities that complement and reinforce entrepreneurship capacity, combines different essential ingredients for entrepreneurship, and is adapted to increases in entrepreneurship capacity. Innovation and business ethics contribute to any kind of entrepreneurship and they make a net contribution to the entrepreneurial capacity and in any entrepreneurial process. Finally, innovation and ethical commitment are more critical for obtaining a high level of entrepreneurial capacity, and they are important for entrepreneurship in general, outside social entrepreneurship and innovative entrepreneurship.

Reassessing the link between firm size and exports

Abstract: This paper re-examines the link between firm size and exports. The new theories of international trade emphasize firm heterogeneity as the theoretical basis of export behavior. In the context of this heterogeneity, this paper uses the quantile regression methodology to analyze the effects of firm size on firm export propensity (percentage of exported sales). The paper confirms the existence of a positive relationship between firm size and export propensity but finds that the conventional estimates of the elasticity of export propensity with respect to firm size on the average of the export propensities’ distribution underestimate the effect at the bottom of the distribution and overestimate the effect on the rest. Consequently, policies aimed at increasing exports should focus their efforts on increasing the size of those firms with a lower export propensity.

An empirical analysis of accounting conservatism surrounding share repurchases

Abstract: This study examines the change of the demand for accounting conservatism surrounding share repurchases for a sample of US listed firms between 2003 and 2013. We find that the extent of accounting conservatism decreases significantly post share repurchase, consistent with the view that share repurchases reduce excess cash and information asymmetry, and consequently the agency-cost demand for conservative accounting decreases. Further analysis finds this result holds only for financially unconstrained firms and firms with low or no financial distress risk, but there is no significant decrease in accounting conservatism for financially constrained firms or for firms with high financial distress risk. This suggests that share repurchases in these firms might result from other motives such as manager hubris, earnings management, or false signals to mislead investors, and thus cannot reduce the agency-based demand for accounting conservatism. Our results add further evidences to the literature on accounting conservatism and firm financial policies.

Institutional quality, conforming and evasive entrepreneurship

Abstract: In this article, we unpack Baumol’s (J Polit Econ 98(5):893–921, 1990) theory of entrepreneurship’s outcomes (productive, unproductive, and destructive) in a framework of failing institutions, considering that entrepreneurship is instead first characterized by two non-mutually exclusive types of behavior (conforming versus evasive). We hypothesize that the evasive activity (firm-level corruption) is undertaken as a second-best response to poor institutional quality, supporting the conforming activity. Using instrumental variable panel regression in the context of Indonesia, we evidence the mediating effect of bribing on the relation between local institutional quality and new business density, thus unveiling the real effect of institutional quality on entrepreneurship.

State business relations and the dynamics of job flows in Egypt and Turkey

Abstract: Long-standing challenges concerning unemployment and the role of government have been the dominant underlying themes in the countries of the Middle East and North Africa (MENA) region. Effective State-Business Relations (SBRs) comprise a set of highly responsive and public interactions between the state and the business sector. The aim of this study is to explore the dynamics of net job creation rates in Egypt and Turkey, and the role of the SBRs, including various firm characteristics. The analysis relies on firm-level data derived from the World Bank Enterprise Surveys over the period 2008–2013. We implement the weighted ordinary least squares (OLS). Furthermore, we apply an Instrumental Variables (IV) Approach and the Two-Stage Least Squares (2SLS) method for robustness check, to deal with the potential endogeneity issues coming from the self-reported statements and the possible degree of reverse causality between SBRs and the main outcomes of interest. Our findings suggest four major obstacles to SBRs, with constraints of access to finance and credit and political instability being the common major obstacles in the two countries explored. Corruption and lack of proper infrastructure in electricity in Egypt are found to be the next two main obstacles in SBRs, while tax rates and competition from the informal sector are identified as the other two main obstacles in Turkey. The results show that obstacles in SBRs contribute negatively to the net job creation. According to these findings, policy implications include the need to make SBRs operate more efficiently, investments on proper infrastructure and policies that minimize corruption and political instability.

Lock-up provisions and valuation of Turkish IPOs

Abstract: I examine the association between lock-up length and valuation bias in a sample of 83 firms going public at Borsa Istanbul. The study is motivated by the fact that lock-up and valuation decisions are given simultaneously preceding the issue, so that lock-up information is incorporated into the valuation model. The problem is important because investors mostly rely on prospectuses to infer company value and make an informed investment decision. I hypothesize an inverse relationship between lock-up period length and valuation bias, on the basis that longer voluntary lock-ups would mitigate information asymmetry in the aftermarket and underwriters value issuers committed to long lock-ups more conservatively in anticipation. I find support for this prediction in the tests. Results show that issuers with long lock-ups are less overvalued relative to the issuers with short lock-ups, while signaling explanation of lock-ups is rejected for the Turkish market. The study contributes to the literature by showing that lock-up length selection plays a significant part in the pre-issue valuation, while market norms and concerns about regulations are paramount in the selection of lock-up length.

The effect of anomalous emotional scenes in children’s movies on future revenues

Abstract: Studying children’s consumption behavior is a sensitive topic, especially in marketing, because children are often not the decision makers for the products and items they consume. Rather, the parents are the moderators and possessors of the purchasing power. Accordingly, parents’ prepurchase acceptance is a crucial determinant in the purchase decisions. Several factors related to the ethical content of children’s movies affect parents’ purchase decisions, including the level of emotional scenes that are depicted in a movie. This research aims to explore the effect of anomalous emotional scenes (AES) in children’s movies on the future revenues of production companies through parents’ acceptance/rejection rates and, consequently reactions to the AES. A total of 791 participants/parents from eight different countries participated by completing a questionnaire for the purpose of this study. Cultural and religious factors were taken into consideration to ensure cross-cultural results. The findings from the quantitative analysis of this study revealed that Anomalous Emotional Scenes perceived by parents in children’s movies negatively impact their demand because of ethical concerns, which are influenced by the cultural factor and not a religion factor. The negative impact consequently reduces potential new and repetitive purchases, which subsequently affects the incremental earnings of the company and thus reduces the overall revenues of the movie. Therefore, AES are a new additional factor that affects the revenues of children’s movies.

Personality and positionality-evidence from survey experiments with alternative goods

Abstract: This paper employs survey experiments to examine the relationship between personality characteristics and positional concerns across a wide range of “goods”, e.g., income and market value of a car, and “bads”, e.g., infant mortality and poverty rates. Personality traits are measured using the five-factor model (Big-5), the locus of control, and reciprocity. We demonstrate that there are significant relationships between personality types and positional concerns, which differ both by the type of personality and by the nature of a good. The results are highly consistent with the predictions presented in the field of personality psychology. That is, while agreeableness is negatively associated, conscientiousness, neuroticism, and external locus of control are positively associated with positional concerns for most goods. Importantly, there is also a substantial heterogeneity in the mean degree of positional concerns across the low and high values of most personality characteristics and goods.

Gender income gap in rural informal micro-enterprises: an unconditional quantile decomposition approach in the handloom industry

Abstract: Based on primary data, the present study analyzes the gender income gap and its compositions throughout the income distribution of the handloom micro-entrepreneurs in Assam. The unconditional quantile decomposition reveals the existence of substantial gender income gaps along the income distribution. The differences in the productive characteristics explain much of the gap at the median and beyond. The endowment effects of education, financial literacy, risk attitude, SHGs membership, and technology adoption are found in favor of the male micro-entrepreneurs. The results suggest that the extent of risk aversion towards producing high-valued dress materials and poor management of entrepreneurial activities of the females have widened gender gap, particularly at the upper quantiles of the income distribution.

Merger waves: are buyers following the herd or responding to structural queues?

Abstract: While there has been a significant amount of research covering the causes of merger waves, few papers have rank ordered merger waves based on the causes nor sought to determine which rationale leads to higher bidder payouts. This paper seeks to fill this gap by examining a cross section of large, global mergers across most industries occurring over a 17 year period. I find that merger waves over this period are caused foremost by changing economic and regulatory conditions. It is the behavioral rationale of mispricing, however, that more often leads to higher bidder payouts or merger premiums among acquirers in merger waves.