Institutional Setting, Government Policy and Firm Performance: A Comparative Perspective
Sunday, Jan. 5, 2020 8:00 AM - 10:00 AM (PDT)
- Chair: Istvan P. Szekely, European Commission
Trade Policy Uncertainty and Innovation: Firm Level Evidence from China's WTO Accession
AbstractA novel channel that trade liberalization may encourage firm innovations by largely removing policy uncertainties in the destination market. To verify this linkage, we adopt a difference-in-differences approach to examine the impact of a reduction in trade policy uncertainty, due to China's WTO accession in 2001, on firm innovation activities. We find that uncertainty reduction significantly encourages firms' patent applications: sectors with larger reduction in uncertainty filed more patent applications after WTO accession. They also invest more in capital assets and import more foreign intermediate inputs.
Disentangling External Flows (External Shocks) and Policy and Regulation Effects on the Credit Activities of Banks in Three Emerging Countries during the Great Recession
AbstractWe analyze the effects of bank wholesale and retail funding swings triggered by the real economy and foreign financial flow shocks, as well as the effects of policy interventions and the regulation environment in three emerging countries (Croatia, Montenegro, and Slovenia) throughout the boom (2007–2008), bust (2009–2010), and recovery (2011–2013) periods of the Great Recession. We find evidence that supply-side factors, in particular wholesale funding, were important for the huge procyclical credit swing, and that the cyclicality of credits to firms was amplified the most. The paper also documents that systematic procyclical policy interventions, which tolerated a credit stampede in the boom period but swiftly curbed the already falling credits in the bust and especially the recovery period, contributed to the enormous macroeconomic costs of the Great Recession in the Balkan countries. The effectiveness of macroprudential and other policies (standard macro, structural) in supporting the stability of financial systems is discussed, and external flow, policy, and regulation effects on the credit activities of banks are disentangled.
Corruption Environment and Investment in Private Firms
AbstractUsing a panel data set of 148,286 firm-year observations related to 41,497 privately owned firms in thirteen European countries between 2001 to 2013, we provide the first large-scale study of the effect of uncertainty about corruption (need to make unofficial payments to public officials) on corporate investments. With a dataset of manager interviews and a dataset of firms’ financial and accounting statements, we find that higher corruption uncertainty is associated with lower corporate investments in medium-size and large domestically-owned firms, but not in foreign-owned firms or very small domestic firms. The level of corruption has no effect on investment when corruption uncertainty is included in estimation, a finding that contradicts earlier corruption studies that did not include corruption uncertainty. Our results hold in fixed effects, instrumental variable, and matching analyses. They are robust to model specifications and suggest that policy should aim at reducing corruption uncertainty (e.g., by having all permits issued by one office).
- H3 - Fiscal Policies and Behavior of Economic Agents
- L1 - Market Structure, Firm Strategy, and Market Performance