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Bankruptcy, performance and market selection : evidence from firms in France
Abstract
The objective of this Ph.D. dissertation is to have a better comprehension of the bankruptcy event for firms that are operating in France. We focus mainly on firms considered to be among the best-performing ones, i.e., exporting firms and innovating firms, that have a higher proportion of default than the general proportion. In the first chapter, we focus on the exporting firms’ sunk costs linked to the foreign markets to evaluate if it acts as an exit barrier or raises their likelihood of going bankrupt. In the second chapter, we estimate the impact of business expenditures on R&D on firms’ survival likelihood to assess how the risk firms take to innovate affects the likelihood of cessation of payment. Finally, in the last chapter, we evaluate how the exit of defaulting firms contributes to the French productivity growth compared to other firm exits. To do so, we use multiple databases to obtain all the information needed across the dissertation (BODACC for information on bankrupt firms, FICUS-FARE for accountancy variables, DADS for labor variables, among others), and other databases that are more specific for the first and second chapters: the custom data on import and exports and the innovation survey. To tackle several methodology issues, such as unobserved variables, truncation bias, and unobserved individual heterogeneity, various methods are used, particularly panel data methodologies applied to non-linear models. We find that sunk costs are not a barrier to exit since it limits the liquid assets available in case of financial difficulties. We also find that R&D activities require a minimum amount of investment to raise the survival likelihood. Finally, we find that the exit of defaulting firms contributes positively and significantly to productivity growth.
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The innovation‐export nexus has been extensively explored, while relatively few studies have focused on innovation's impact on firms' export survival and the role of export mode. Using a large panel dataset from China, this research empirically explores how innovation impacts firms' export survival, considering export modes. First, we employ the discrete‐time survival analysis model (cloglog) to examine this research addressing the censored issue. Second, the propensity score matching (PSM) methodology is employed to address the selection‐bias issue and select the similar firms based on which to compare their Kaplan–Meier survivor probability. Results present a positive role of innovation in the export survival of direct exporters; however, there is an inverted‐U relationship between innovation intensity and their survival probability. For indirect exporters, evidence shows an insignificant innovation‐export survival nexus. In addition, results show higher export survival for Chinese innovative exporters who are foreign‐owned, highly export‐intensive, long‐lasting in export market, in technology industries. For innovative exporters who export directly, those in medium and low‐technological industries and export capital goods are more likely to survive. Our research provides insights for Chinese exporters regarding innovation participation and suggests the government conducting prudent and deliberate design for innovation strategy.
This paper deploys a dynamic extension of the Melitz (Econometrica 71(6):1695–1725, 2003) model to generate predictions on export market exit and firm survival in a setting where firms endogenously make exit decisions. In contrast, previous work typically assumes simple random death. The central driver of the model dynamics—creating the endogenous exit decision of firms—is the inclusion of exogenous economy wide technological progress. Thus our framework contains vintage capital properties and accordingly creative destruction of old firms by new firms. The model predicts—inter alia—that a higher relative productivity increases not only the likelihood of exporting, but also the chances of firm survival and continued export market engagements. We relate the model predictions to the empirical stylized facts of export market exit and firm survival based on Danish firm-level data. Overall, our empirical results support the central predictions from the model. First, productivity is a good predictor for survival. Secondly, firms experience a decline in market share prior to death and export market exit. Thirdly, firms that die or quit their exporting activity are small. Fourthly, small firms constitute the largest share of exits in a given cohort. Fifthly, the productivity distribution of survivors first-order dominates the one of exiting firms on both domestic and export markets. Finally, we confirm that a large share of firms which stop exporting continue to exist as pure domestic firms.
This paper accounts for the development of the academic endeavour to determine the firm-level relationship between investments in R&D and productivity. The impact of 28 highly cited publications within this line of study is investigated using a combination of bibliometric techniques and citation function analysis. We show how the attention paid to this line of research broadens and deepens in parallel to the diffusion of innovation as a research theme during 2000s. Our findings also suggest that the attraction of scholarly attention is driven by combination of broadening interest in the central research question under study and boundary-pushing methodological contributions made in the key contributions.
Existing evidence on the relationship between R&D intensity and firm survival is varied and often conflicting. We argue that this may be due to overlooking R&D scale effects and complementarity between R&D intensity and market concentration. Drawing on Schumpeterian models of competition and innovation, we address these issues by developing a formal model of firm survival and using a panel dataset of 37,930 of R&D-active UK firms over 1998–2012. We report the following findings: (i) the relationship between R&D intensity and firm survival follows an inverted-U pattern that reflects diminishing scale effects; (ii) R&D intensity and market concentration are complements in that R&D-active firms have longer survival time if they are in more concentrated industries; and (iii) creative destruction as proxied by median R&D intensity in the industry and the premium on business lending have negative effects on firm survival. Other findings concerning age, size, productivity, relative growth, Pavitt technology classes and the macroeconomic environment are in line with the existing literature. The results are strongly or moderately robust to different samples, stepwise estimations, and controls for frailty and left truncation.
The effect of competition on innovation incentives has been a controversial subject in economics since Joseph Schumpeter advanced the theory that competitive markets are not necessarily the most effective organizations to promote innovation. The incentive to innovate is the difference in profit that a firm can earn if it invests in research and development compared to what it would earn if it did not invest. The concept is straightforward, yet differences in market structure, the characteristics of innovations, and the dynamics of discovery lead to seemingly endless variations in the theoretical relationship between competition and expenditures on research and development or the outputs of research and development (R&D). This paper surveys the economic theory of innovation, focusing on market structure and its relationship to competition, the distinction between product and process innovations, and the role of exclusive and nonexclusive rights to innovation, and draws conclusions from the different models. Exclusive rights generally lead to greater innovation incentives in more competitive markets, while nonexclusive rights generally lead to the opposite conclusion, although there are important exceptions. The paper reviews the large literature on empirical studies of innovation and finds some support for the predictions of the theory.
Rather than evolving as a platform for renegotiation and debt discharge, as in France, English bankruptcy law emerged as a liquidation-only institution after majority arrangements among creditors were prohibited, in 1621. However, after 1705, good faith debtors could be offered a discharge, i.e. a form of limited liability. Later, private practices also developed into a little-known body of consistent, court-enforced, "quasi-bankruptcy rules" based however on voluntary adhesion. A key element was the convergence between the old, Law Merchant "composition agreement" and the English trust, to which creditors could jointly convey assets. By the 1780s, therefore, merchants were offered rigidity under the statutes or large, though voluntary negotiability in their shadow. Conversely, the French traders' courts consistently helped the merchants overcome undue defaults, i.e. market failures. But majority vote limited the capacity to restructure rights and to design arrangements that may have better preserved their collective interest over time.
The process of creative destruction is being documented for a growing number of countries as the required firm-level data are becoming more easily accessible to researchers. Some early attempts have been made to compare results from the individual country studies and to gain insights into the sources of the variation in firm dynamics across countries. Comparative studies may be particularly useful to test the hypothesis that market structure and institutional differences across countries affect the observed magnitude, nature and efficiency of the creative destruction process. However, these "meta analyses" or ex-post comparisons of country studies are inherently difficult given differences in measurement and methodology across studies. Ideally, firm-level data would be pooled across countries in a harmonized fashion in order to exploit within and between country variations in a fully consistent manner. While there has been some progress in creating comparable firm-level data through surveys sponsored by international organizations, virtually all of the pooled firm-level datasets do not reflect representative samples of firms in each of the countries. The pooling of nationally representative firm-level data used by national statistical agencies is essentially impossible given privacy and confidentiality restrictions on micro data. This paper highlights the measurement and analytical challenges incurred using an alternative approach, namely the compilation of harmonized detailed statistics on firm dynamics obtained by applying common definitions and extraction criteria across countries. Even this ex-ante harmonization of definitions and extraction criteria does not prevent problems of cross-country comparability, since there are idiosyncratic features in the country datasets that cannot be reconciled. A closely related problem with such cross-country comparisons of measures of firm dynamics is that measurement errors vary across countries, especially with respect to the coverage of different types of businesses and the quality of longitudinal linkages. For measures of firm dynamics both are critical and imply that the direct comparison of the magnitude of creative destruction across countries is problematic. In this paper we present comparisons of those measures where the problems are less severe. Further, many cross-country comparisons are made by exploiting the within-country variation, i.e. by performing difference-in-difference comparisons. We illustrate these measurement issues taking advantage of a newly assembled dataset that draws from separate national micro-data sources (business registers, census, or representative enterprise surveys) but with ex-ante harmonization of the metadata and computational methods.
We use a representative and cross-country comparable sample of manufacturing firms (EFIGE) to document patterns of interaction among firm-level internationalization, innovation and productivity across seven European countries (Austria, France, Germany, Hungary, Italy, Spain, United Kingdom). We find strong evidence of positive association among the three firm-level characteristics across countries and sectors. We also find that the positive correlation between internationalization and innovation survives after controlling for productivity, with some evidence of causality running from the latter to the former. Our analysis suggests that export promotion per se is unlikely to lead to sustainable internationalization because internationalization goes beyond export and because, in the medium to long term, internationalization is likely driven by innovation. We recommend coordination and integration of internationalization and innovation policies ‘under one roof’ at both the national and EU levels, and propose a bigger coordinating role for EU institutions.
— Carlo Altomonte, Tommaso Aquilante, Gábor Békés and Gianmarco I.P. Ottaviano
The propensity score is the conditional probability of assignment to a particular treatment given a vector of observed covariates. Both large and small sample theory show that adjustment for the scalar propensity score is sufficient to remove bias due to all observed covariates. Applications include: (i) matched sampling on the univariate propensity score, which is a generalization of discriminant matching, (ii) multivariate adjustment by subclassification on the propensity score where the same subclasses are used to estimate treatment effects for all outcome variables and in all subpopulations, and (iii) visual representation of multivariate covariance adjustment by a two- dimensional plot.
While innovation is a source of competitiveness, it may expose plants to survival risks. Using a rich set of plant-product data for Chilean manufacturing plants during the period 1996-2006 and discrete-time hazard models controlling for unobserved plant heterogeneity, this paper shows that innovating plants have higher survival odds. However, risk plays an important role for the innovation-survival link: only innovators that retain diversified sources of revenues survive longer. Single-product innovators are at greater risk of exiting. In addition, only innovators facing lower market risk, measured by fewer innovative competitors, low-pricing strategies, or lower sales volatility in the new products'markets, see their odds of survival increase significantly. Technical risk, measured by the proximity of product innovations to the plants'past expertise, the degree of sophistication of new products, or their novelty to the Chilean market, does not play a substantial role in the innovation-survival link. Engaging in risky innovation is not an irrational decision, since plants reap big payoffs -- higher productivity, employment and sales growth -- from such innovations. However, those payoffs are not always higher than those from cautious innovation, suggesting that constraining factors, such as credit constraints, force plants to take on more risk when innovating. An implication of the findings for industry dynamics is that among innovators, only the survival of cautious innovators is guaranteed. Since engaging in cautious innovation may not be feasible for all plants, there could be a role for policy in reducing innovators'exposure to risks and providing assistance to deal with failed innovations, while setting the right incentives.
We propose a new measure of allocative efficiency based on unrealized increases in aggre-gate productivity growth. We show that the difference in the value of the marginal product of an input and its marginal cost at any plant -the plant-input "gap" -is exactly equal to the change in aggregate output that would occur if that plant changed that input's use by one unit. The mean absolute gap across plants for any input can then be interpreted as the gain to society that would occur if every plant had a one-unit change in that input in the efficient direction, holding everything else constant. We show how to estimate this average gap using plant-level data from Chilean manufacturing from 1982-1994, a sector largely viewed as being one of South America's least distorted. We find the gaps for blue and white collar labor are quite large in absolute value and increasing over time, and that a one-unit move in the correct direction for blue collar would increase aggregate value added by almost 0.5%. We find the gap for materials is small and the gap for electricity non-neglible but not robust. We also find that the timing of the two separate increases in firing costs -one in 1985 and one in 1990 -is suggestive that the increase in average within-firm labor gaps is related to the increases in severance pay. We find no evidence that gaps increase for inputs that are not directly affected by firing costs.
I build a simple dynamic model of the formation of an international social network of importers and exporters. Firms can only export into markets in which they have a contact. They acquire new contacts both at random, and via their network of existing contacts. This model explains (i) the cross-sectional distribution of the number of foreign markets accessed by individual exporters, (ii) the cross-sectional geographic distribution of foreign contacts, and (iii) the dynamics of firm level exports. I show that the firm level dynamics of trade can explain the observed cross section of firm level exports. All theoretical predictions are supported by the data.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Using Canadian-invented patents granted by the United States Patent and Trademark Office during the period between 1995 and 2014, we investigate how ownership of Canadian inventions varies across time and by technology, geographic region, quality of invention, and the presence of superstar firms. Our findings show that the gap between Canadian-invented and Canadian-owned technologies has grown since 1995, and that an increasing number of Canadian-invented patents are owned by foreign, primarily US, firms. In terms of technical areas, Canadian-owned patents in biotechnology have declined and there has been sharp growth in both Canadian- and foreign-owned patents in information technology and telecom. Approximately 60% of Canadian-invented patents originate from Toronto, Ottawa-Gatineau, Montreal, Vancouver, Kitchener-Cambridge-Waterloo (KCW), and Calgary. The quality of Canadian-invented patents increases over time, in part because the number of unassigned patents declines. The quality of foreign-owned patents is higher than the quality of Canadian-owned patents in all CMAs except KCW. At the firm level, while Blackberry and Nortel are responsible for a disproportionate number of Canadian-owned patents, the ownership of foreign-owned patents is more widely distributed. Our findings point to where Canadian innovation vulnerabilities are most severe, where they are worsening, and where there is cause for hope.
This study investigates innovation output by examining patents of listed companies with and without R&D expenditure disclosures and the role of product market competition in R&D expenditure disclosure choices when the institutional environment of an emerging market tends to be relatively transparent. Using the data of Chinese listed firms from 2007 to 2014, which provides an appropriate setting for our study, we find a positive relationship between R&D expenditure disclosures and the quantity of patents and patent applications, which is consistent with the institutional hypothesis. Moreover, we show that in the absence of sufficient institutional protection, market competition has a negative effect on R&D expenditure disclosures, which is consistent with the product market competition hypothesis. Further analyses show that this relation is affected by firm size, state ownership, loss-making, and analyst coverage. The results remain consistent after several robustness checks. This study contributes to the literature by shedding light on the usefulness of voluntary R&D expenditure disclosures for predicting innovation outcomes in emerging markets.
This paper explores the extent to which ‘zombie’ firms – defined as old firms that have persistent problems meeting their interest payments – are stifling labour productivity performance. The results show that the prevalence of and resources sunk in zombie firms have risen since the mid-2000s and that the increasing survival of these low productivity firms at the margins of exit congests markets and constrains the growth of more productive firms. Controlling for cyclical effects, cross-country analysis shows that within-industries over the period 2003–13, a higher share of industry capital sunk in zombie firms is associated with lower investment and employment growth of the typical non-zombie firm and less productivity-enhancing capital reallocation. Besides limiting the expansion possibilities of healthy incumbent firms, market congestion generated by zombie firms can also create barriers to entry and constrain the post-entry growth of young firms. Finally, we link the rise of zombie firms to the decline in OECD potential output growth through two key channels: business investment and multi-factor productivity growth.
This paper examines the importance of buyer-supplier relationships for firm performance. We develop a model in which firms outsource tasks and search for suppliers. Lower search and outsourcing costs lead firms to search more and find better suppliers, which in turn drives down marginal costs. We test the theory by exploiting the opening of a high-speed train line in Japan, which lowered the cost of passenger travel but left shipping costs unchanged. Using an exhaustive data set on firms’ buyer-seller linkages, we find significant improvements in firm performance as well as creation of buyer-seller links, consistent with the model.
This paper proposes a novel decomposition of aggregate productivity to evaluate the role of allocative efficiency for the cyclical dynamics of aggregate productivity. The decomposition, which is derived from the aggregation of heterogeneous firm-level production functions, accounts for changes in allocative efficiency, as well as for changes in entry and exit. This approach thereby extends Solow's (1957) growth accounting exercise to a framework with firm heterogeneity and frictions in the allocation of resources across firms. I apply the decomposition to a comprehensive dataset of French manufacturing and service firms, and I find that entry and exit contribute little to the year-on-year variability of sectoral productivity, between-sector allocative efficiency plays a limited role for the volatility of aggregate productivity, whereas within-sector allocative efficiency is countercyclical and tends to reduce the volatility of sectoral productivity.
The paper provides an original empirical approach to investigate multi-product firms’ export patterns across destinations by considering the whole mix of products exported by a firm, formally defined as a product-vector. The proposed methodology allows to take into account a firm's choice of both exporting and non-exporting a product to a destination and to consider different forms of product complementarity that can generate product combinations. The empirical analysis uses a panel of transactions level data for the universe of Italian and French firms and complements the existing evidence along a few dimensions. First, we show that there is a high level of sparsity: selection of products at destination is indeed very severe. Second, we document that firms export several different combinations of product vectors across markets. Relatedly a high level of diversity is detected also when considering the intensive margin, pointing to a substantial departure from a stable global product hierarchy. Finally, we provide evidence that at the same time there exists a stable component in firms’ product vectors across destinations composed by products which are not necessarily the most important in terms of sales, suggesting rich form of complementarities across goods. Products belonging to this stable component are less likely to be discarded as a consequence of an exogenous shock such as the dismantling of the MFA quotas after accession of China to the WTO.
The impact of innovation mechanisms on firm survival remains inconclusive in the existing literature, especially when we consider the case of a rapidly growing emerging economy. Using a unique firm-level dataset of 14,065 Chinese high-tech start-ups from 2007 to 2013, we employ a discrete time hazard model to study the impact of differences in internal and external innovation mechanisms, specifically, innovation efficiency and spillover effect derived from trade, on the likelihood of firms' survival as these factors are currently less understood. Bigger and older technology-intensive firms tend to have lower probalility of exit. Our results suggest that innovation as measured by patents, innovation efficiency and firms' import and export activities can increase the survival rate of Chinese high-tech firms. This implies that policy makers should focus on promoting both internal and external innovation mechanisms to improve the survival of indigenous high-tech firms.
Innovation plays a key role in economic growth. In this paper, we investigate the effects of intermediate input tariff reduction on the innovation activities of domestic firms. Input tariff reduction has two opposite effects on the innovation decision of a firm: it may promote innovation because the cost of innovation activities decreases, but it may also result in a decrease in innovation because foreign technologies become cheaper. We use Chinese firm-level data from 1998 to 2007, which features a drastic input tariff cut in 2002 because of China’s WTO accession, and find that input tariff cut results in less innovation undertaken by Chinese firms. The findings are obtained using the difference-in-differences technique and are robust to various specifications checks of the model. We also provide a theoretical framework to generate insights to the empirical findings.
This study examines how trade-related spillovers impact the OECD countries' industrial competitiveness; with an emphasis on China's innovative efforts and reintegration into the global economy. In comparison with the major R&D countries, benefits attributable to spillovers are found to be more sizable for the rest of the OECD countries.
This result is consistent with the observed convergence of competitiveness between the two groups of countries during 1990–2009.
Moreover, our empirical results suggest China's trade-related spillovers can produce both positive and negative effects on OECD countries' industrial competitiveness. The persistence of the spillover effects is found even after controlling for trade openness creating possible spurious association. Finally, our finding TFP growth as the competitiveness driver stresses the consequential role of STI (science, technology, and innovation) policies in supporting sustainable and balanced growth.
This paper revisits the empirical innovation-productivity relationship based on the research initiated by Crépon, Duguet, and Mairesse (1998). We use a dataset including (almost) all firms (group enterprises), located in the Netherlands, that applied for one or more patents issued by the European Patent Office during the period 2000-2006. We estimate a structural, dynamic panel data model that disentangles the impact of R&D expenditure on (European) patent applications and the impact of patent applications on Multi-Factor
Productivity (Growth). We also allow for the possibility that a
firm with patent applications does not report its R&D. We find
evidence that the output innovation affects productivity positively and the strong presence of random effects in explaining the R&D-patent relationship is an important driver to innovation.
We develop a model of endogenous productivity change to examine the impact of the investment in knowledge on the productivity
of firms. Our dynamic investment model extends the tradition of the knowledge capital model of Griliches (1979) that has remained a cornerstone of the productivity literature. Rather than constructing a stock of knowledge capital from
a firm's observed R&D expenditures, we consider productivity to be unobservable to the econometrician. Our approach accounts
for uncertainty, non-linearity, and heterogeneity across firms in the link between R&D and productivity. We also derive a
novel estimator for production functions in this setting. Using an unbalanced panel of more than 1800 Spanish manufacturing
firms in nine industries during the 1990s, we provide evidence of non-linearities as well as economically significant uncertainties
in the R&D process. R&D expenditures play a key role in determining the differences in productivity across firms and the evolution
of firm-level productivity over time.
This paper explores the idea that firms learn from trade by introducing either new products or processes influenced by their trade links with foreign markets. By exploring microdata for Spain, including data on innovation and trade, we find a robust relationship between imports, exports and innovation. The results suggest that firms learn primarily from import links, which enable them to innovate and to ‘dress up’ for starting to export. This sequencing between trade and innovation, however, is shown to be more pronounced for small firms only and technologically advanced firms.
This article provides an empirical model of the shadow of death in which the exit probability of a firm depends on the firm’s productive performance and the firm’s level of sunk costs, which are viewed as barriers to exit. The shadow of death effect is treated by assuming a relationship between the propensity to exit and both the contemporaneous and lagged values of efficiency and sunk costs. To estimate the unobserved productive efficiency, we use the Ackerberg et al. (2006) estimator extended by the addition of a correction for selection bias. We use an unbalanced sample of approximately 100 000 French firms over the period 1997 to 2002. Our results indicate that the probability of exit is negatively affected by unobserved individual efficiency and the level of sunk costs. The shadow of death effect applies mainly in manufacturing, where both productive efficiency and sunk costs decrease during several years before exit. In service sectors, the exit process seems to occur more suddenly.
A large portion of differences in output per capita across countries is explained by differences in total factor productivity (TFP). In this article, we summarize a recent literature — and the articles in this special issue on misallocation and productivity — that focus on the reallocation of factors across heterogeneous production units as an important source of measured TFP differences across countries.
The dynamics of export market exit and firm closure have found limited attention in the new heterogeneous-firms trade literature. In fact, several of the predictions on firm survival and exit stemming from this new class of models are at odds with the stylized facts. Empirically, higher productivity firms survive longer, most firm closures are young firms, higher productivity exporters are more likely to continue to export compared to less productive exporters and market exits as well as firm closures are typically preceded by periods of contracting market shares. The present paper shows that the simple inclusion of exogenous economy wide technological progress into the standard Melitz (2003) model generates a tractable dynamic framework that generates endogenous exit decisions of firms in line with the stylized facts. Furthermore, we derive the effects of faster technological progress and trade liberalization on export market exit and firm closure.
In this paper, we propose an extension of the productivity decomposition method developed by Olley & Pakes (1996). This extension provides an accounting for the contributions of both firm entry and exit to aggregate productivity changes. It breaks down the contribution of surviving firms into a component accounting for changes in the firm-level distribution of productivity and another accounting for market share reallocations among those firms -- following the same methodology as the one proposed by Olley & Pakes (1996). We argue that the other decompositions that break-down aggregate productivity changes into these same four components introduce some biases in the measurement of the contributions of entry and exit. We apply our proposed decomposition to the large measured increases in Slovenian manufacturing during the 1995-2000 period -- and contrast our results with those other decompositions. We find that, over a 5 year period, the measurement bias associated with entry and exit is substantial, accounting for up to 10 percentage points of aggregate productivity growth. We also find that market share reallocations among surviving firms played a much more important role in driving aggregate productivity changes.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Integrating perspectives of the Uppsala model of internationalization process, international new ventures and trade theories of heterogeneous firms, this paper develops a dynamic discrete-choice model of export decisions by a profit-maximizing firm. Empirical analyses based on a panel data set of Chinese firms show that sunk costs, productivity, firm size, foreign ownership, industry competition and spatial concentration are positively associated with the decision to export, while state ownership has a negative association with the probability of exporting. However, we find that the relationships are not always uniform and depend on firm-specific idiosyncrasies. The results show that foreign-invested firms and large firms (regardless of ownership) rely on productivity performance related advantages for expanding overseas, while domestic firms, especially small- and medium-sized enterprises, build competitive advantage by leveraging agglomeration economies and the associated spillovers. Our results highlight the role of firm heterogeneity, sunk costs and spatial concentration in shaping the export behavior of firms.
In this paper, we test the characteristics of bankruptcy procedures that are likely to generate recoveries for the creditors. Such recoveries are related to the performance of bankruptcy law as they stem from the procedures’ ability to preserve the value of bankrupt firms, as basis of creditors’ repayment. We give elements of answer by taking into consideration two countries that are good representatives of the two main legal systems prevailing in Europe: France (Civil Law) and England (Common Law).In order to identify the characteristics of bankruptcy procedures that generate recoveries, we build 132 original legal indexes accounting for the main functions of bankruptcy law that were highlighted initially by Hart (2000). Namely, we measure the accessibility of the procedures, their ability to disclose public information, the level of protection of the debtor’s assets, the coordination of the claimants and their decision power under bankruptcy, and the sanction of faulty management. We show that the French procedures are more protective of the debtor’s assets and favor more the coordination of claims. In England, we find strong opposition between the liquidation and the reorganization procedures: the former ones prioritize the protection of secured claims, while unsecured creditors benefit from higher decision power under the latter ones.We then use an original database of 833 French and English bankrupt SMEs to measure the recovery rates that are generated by each procedure. By controlling for the value of assets, the structure of claims, the origins of default, and the firm characteristics, we first isolate the bankruptcy rules that are associated with higher recovery rates: namely, accessibility of the procedure, protection of the debtor’s assets, protection of claims, and sanctions against faulty management. On the contrary, information disclosure under bankruptcy has negative impact on total recoveries, probably due to the breach in confidentiality.
This article develops a general equilibrium model of multiple-product, multiple-destination firms, which allows for heterogeneity in ability across firms and in product attributes within firms. Firms make endogenous entry and exit decisions and each surviving firm chooses optimally the range of products to supply to each market. We show that the resulting selection, across and within firms, provides a natural explanation for a number of features of trade across firms, products, and countries. Using both time-series changes in trade policy and cross-section variation in trade, we provide empirical evidence in support of the predictions of the model. Copyright 2011, Oxford University Press.
This paper uses survival analysis to investigate the duration of Spanish firms’ trade relationships by destination over 1997-2006. Whereas firm export status is highly persistent, firms’ destination portfolio is very dynamic: a typical firm-country exporting relationship has a median duration of two years. Yet, if a firm manages to export to a country beyond two years the risk of exiting that market sharply falls afterwards. The results indicate that not only firm heterogeneity but also destination heterogeneity are crucial to explain survival in export markets. In particular, country (political) risk heavily shapes the effect of firm, product and other destination characteristics on the length of trade relationships. Whereas firm productivity, comparative advantage, partners’ GDP and proximity enhance duration of trade with low-risk countries, they have no effect on trade survival with high-risk countries. On the contrary, information spill-overs are particularly relevant to enhance survival of trade relationships with high-risk countries.
We study whether there is scope for using subsidies to smooth out barriers to R&D performance and expand the share of R&D firms in Spain. We consider a dynamic model with sunk entry costs in which firms’ optimal participation strategy is defined in terms of two subsidy thresholds that characterise entry and continuation. We compute the subsidy thresholds from the estimates of a dynamic panel data type-2 tobit model for an unbalanced panel of about 2,000 Spanish manufacturing firms. The results suggest that “extensive” subsidies are a feasible and efficient tool for expanding the share of R&D firms.
The analysis of censored failure times is considered. It is assumed that on each individual are available values of one or more explanatory variables. The hazard function (age‐specific failure rate) is taken to be a function of the explanatory variables and unknown regression coefficients multiplied by an arbitrary and unknown function of time. A conditional likelihood is obtained, leading to inferences about the unknown regression coefficients. Some generalizations are outlined.
I build a model of international trade with liquidity constraints. If firms must pay some entry cost in order to access foreign markets, and if they face liquidity constraints to finance these costs, only those firms that have sufficient liquidity are able to export. A set of firms could profitably export, but they are prevented from doing so because they lack sufficient liquidity. More productive firms that generate large liquidity from their domestic sales, and wealthier firms that inherit a large amount of liquidity, are more likely to export. This model predicts that the scarcer the available liquidity and the more unequal the distribution of liquidity among firms, the lower are total exports. I also offer a potential explanation for the apparent lack of sensitivity of exports to exchange rate fluctuations. When the exchange rate appreciates, existing exporters lose competitiveness abroad, and are forced to reduce their exports. At the same time, the value of domestic assets owned by potential exporters increases. Some liquidity constrained exporters start exporting. This dampens the negative competitiveness impact of a currency appreciation. Under some circumstances, it may actually reverse it altogether and increase aggregate exports. This model provides some argument for competitive revaluations.