The unintended de-dollarization effect of a public credit guarantee program

The purpose of this research was to investigate leverage-performance relation with moderating firm size in developing countries like Pakistan. Data were collected from 304 Pakistani non-financial firms for the period of 2005-2013. It is found that overall leverage-performance relation is negative for all types of firms. However,such losses are more prominent for small size firms. Results also show that the leverage-performance relation is nonlinear for medium and large size firms. However, these firms are not targeting optimal level and overleveraging that ultimately decrease their profits. So, financial managers of small size firms should avoid debt financing while for large and medium size firms, managers need to adjust their debt ratio to its optimal level.

The Italian economy has always been characterized by a relatively large presence of medium and small size firms, a feature that has received a range of definitions and has been the subject of a large number of studies even in the international literature. The continued and sometimes large relative presence of small plants and firms has long been considered a kind of anomaly. However, the alleged inefficiency and unsustainability of small scale productions is in patent contrast with the durability of the phenomenon, with the good economic performance of those regions where small scale production dominates, with the often high innovation performance of small firms, with their export performance and with the high degree of internationalisation of many small and medium size firms. Small wonder then that in the last twenty years there has been a complete revision of the interpretation of the small firm’s role in economic theory, mainly along the lines of evolutionary economic theory (Section 14.2).

We analyze the effects of macroprudential policies on local bank credit cycles and interactions with international financial conditions. For identification, we exploit the comprehensive credit register containing all bank loans to individuals in Romania, a small open economy subject to external shocks, and the period 2004-2012, which covers a full boom-bust credit cycle when a wide range of macroprudential measures were deployed. Although household leverage is known to be a key driver of financial crises, to our knowledge this is the first paper that employs a household credit register to study leverage and macroprudential policies over a full economic cycle. Our results show that tighter macroprudential conditions are associated with a significant decline in household credit, with substantially stronger effects for foreign currency (FX) loans than for local currency loans. The effects on FX loans are higher for: (i) ex-ante riskier borrowers proxied by higher debt-service-toincome ratios and (ii) banks with greater exposure to foreign funding. Moreover, tighter macroprudential policy has stronger dampening effects on FX lending when global risk appetite is high and foreign monetary policy is expansionary. Finally, quantitative effects are in general larger for borrower rather than lender macroprudential policies.

This study investigates whether firm size moderates the relationship between cash conversion cycle and profitability over 8-year period for 285 German non-financial firms. The moderated regression results reveal that the relationship between cash conversion cycle and profitability is moderated by firm size. As the firm size gets smaller and the cash conversion cycle gets longer, the returns on assets decreases. When the firm size gets bigger and the cash conversion cycle gets longer, on the other hand, the returns on assets increases. In this context, reducing the length of cash conversion cycle has a positive impact on profitability for only small and medium-sized firms. Accordingly, this study concludes that small and also medium-sized firms, contrary to big firms, should reduce the length of cash conversion cycle in order to increase profitability.

The authors analyze how firms of different sizes reward measured skills and unmeasured ability. The empirical methodology, based on nonlinear instrumental variable estimation, permits direct estimation of the returns to unmeasured ability by firm size. An analysis of panel data from the Canadian Survey of Labour and Income Dynamics for two periods, 1993–1998 and 1996–2001, reveals statistically significant differences between firms of different sizes. In particular, returns to unmeasured ability are higher in medium-sized firms than in either small firms or large firms. The authors find that the firm-size wage gap and the differential in returns to unmeasured ability between small and medium-sized firms is mainly explained by ability sorting. The fact that larger firms reward ability less than medium-sized firms is consistent with an explanation based on monitoring costs. When firms become “too large,” monitoring costs may prevent them from rewarding ability directly through wages.

Although corruption is a serious problem in many developing countries, it does not affect all firms equally. Large firms might be able to avoid corrupt officials by either appealing to high-level officials or by lobbying government bodies. Similarly, small firms might be able to avoid corrupt officials by remaining partly or fully in the informal sector. Using data from the World Bank’s Enterprise Surveys, this paper looks at the relationship between firm size and corruption. The results suggest a non-linear relationship between corruption and firm size; corruption is most burdensome on medium-sized firms with between 15 and 40 employees. The results might partly explain why many developing countries have a ‘missing middle’ with many small and large firms, but few medium-sized firms. Keywords Corruption; Firm Size; Informality; Lobbying; Missing Middle.

Firms can succeed in innovation process by using external opportunities, relations and possibilities as well as their own resources. In this study the application-level of factors affecting innovation such as gaining financial support, access to knowledge sources and cooperation was analyzed whether they change with the firm size. In this regard, firm-level data of Turkish Statistical Institute (TurkStat) Innovation Survey 2012 were used. Findings have revealed that innovation success of firms improves along with the number of employees; but there is no significant difference in the proportion of innovative outputs between small and medium-sized firms. Large firms are in a better state regarding both accessing and effective use of opportunities comparing to small and medium-sized firms. On the other hand, level of collaborations and external links also decreases with the size of the firms. The increase in the rate of firms’ utilization of financial resources or innovation subsidies from public institutions/organizations and European Union institutions along with the firm size is among the remarkable results.Keywords: Firm size, Innovation, Collaboration, Knowledge sources.

This study compared the public policy interactions over time between small and medium-sized firms. Hypotheses related to firm size, frequency of activity, and influence methods were developed and tested. Small and medium-sized firms had different patterns of public policy involvement, with medium-sized firms reporting less activity but more success in influencing the public policy process than did small firms. Of the influence methods, only letter writing was significant to reported success rates. A regression analysis revealed that firm size and letterwriting variables provided the best fit in a linear-relationship model.

This study examines the structural mechanism through which environmental pressure influences firm performance via environmental innovation, while investigating the moderating role of government support and firm size differences. Using microdata from the 2024 Korean Innovation Survey (manufacturing sector), the analysis focuses on 2,674 firms that have introduced at least one eco-beneficial innovation. Partial least squares structural equation modeling (PLS-SEM) was employed, with environmental innovation specified as a second-order construct. In addition, multi-group analysis (PLS-MGA) was conducted to explore firm size heterogeneity. The results indicate that environmental pressure positively affects environmental innovation and firm performance, both directly and indirectly through environmental innovation. Government support shows a significant negative moderating effect on the relationship between environmental pressure and environmental innovation, suggesting a buffering or substitution effect among firms that have already adopted environmental innovations. Multi-group analysis reveals that large firms exhibit stronger effects of environmental pressure on both environmental innovation and performance than medium-sized firms, whereas small firms show a stronger linkage between environmental pressure and environmental innovation than medium-sized firms. These findings suggest that the performance implications of environmental pressure and policy support vary by firm size and innovation stage, providing important implications for differentiated environmental and innovation policy design.

This study examines the impact of R&D spillover and firm size on the R&D intensity of electronic firms operating in India for the time period 2000–2015. The study finds that firms benefitting from R&D spillover in their line of business are spending more on in-house R&D, indicating complementarity between R&D spillover and R&D efforts. When we consider possible R&D spillover with firm size, the positive association between R&D spillover and in-house R&D activity holds after a certain threshold of firm size is reached. A probable implication for the moderating influence of firm size suggests that large-sized firms have financial resources and the capability to assimilate technological knowledge in their product designs and processes. An inverted-U relationship between firm size and R&D suggests that support and assistance with the cost of research and development can spur the innovation incentive of small- and medium-sized firms. The empirical finding indicates that fringe firms in the electronics sector aim at developing new technology. The import of intermediate inputs appears to be negatively associated with in-house R&D. This suggests substitutability between imported intermediaries and R&D activity. In the case of R&D reporting firms, the coefficient of embodied technology and capital intensity turns out to be positive and significant. As it remains, an increase in the import of capital goods promotes in-house R&D of electronic firms. At the same time undertaking R&D activity in a high-tech sector is capital intensive. Hence, firms require capital reserves to engage in innovative activities and remain competitive.

This article examines whether the gains from economic integration agreements (EIAs) vary across firm sizes. The empirical analysis makes use of a unique and unbalanced panel dataset with 1,520 country pairs, firm sizes and EIAs from 2007 to 2017. First, we decompose the aggregate export flows across firm sizes, that is, micro, small, medium and large. Second, we deconstruct the extensive and intensive export margins across firm sizes. The empirical model follows a panel estimator with structural gravity specification and estimates the EIA coefficients by employing three-way (exporter-time, importer-time and country-pair) fixed effects. The results indicate that EIAs positively affect overall export flows for firms of all sizes; however, for large and medium-sized firms, this positive effect is primarily through the intensive margin, whereas, for the small and micro-sized firms, it is exclusively through the extensive margin. JEL Codes: F1, F15

Recent downward trends in corporate giving have renewed interest in the factors that shape corporate philanthropy. This paper examines the relationships between charitable contributions, firm size and industry. Improvements over previous studies include an IRS data base that covers a much broader range of firm sizes and industries as compared to previous studies and estimation using an instrumental variable technique that explicitly addresses potential simultaneity between charitable contributions and profitability. Important findings provide evidence of a cubic relationship between charitable giving and firm size and evidence of strong industry effects. The plus-minus-plus regression coefficient sign pattern for the cubic firm size model suggests that small and large firms give more relative to total receipts with lower giving ratios among medium size firms. One interpretation for this finding is that small firms are close to the communities they serve while high visibility creates a need for large firm philanthropy. Strong industry effects provide evidence of inter-industry differences in giving culture and/or different public relations requirements across industries.

This paper investigates how firm size and global sourcing affect the export surviving probabilities. By using data on export and import transactions disaggregated by destination/origin for the entire Danish manufacturing firms between the period 1995–2006, the author is able to classify the firms into different size categories and to observe whether they continue or cease to export. Moreover, he is able to define whether the firms source intermediate inputs from high- or low-wage counties. The results, after controlling for the endogeneity of the international sourcing decision by using instrument variable and propensity score matching, indicate that firm size is positively correlated with the likelihood of continuing to export. Moreover, for small and medium size firms, global sourcing seems also to increase the probability of staying in the export market but only if they source from high-wage countries. However, sourcing inputs from abroad, no matter if it is from high- or low-wage countries, do not seem to significantly affect the export surviving probabilities for larger firms.

Using the small and medium size firms in the US as a sample, this paper reports on interrelationship among patents, publications and new products. Correlates of R&D expenditure, patents and papers and new products are presented. Relationships between firm size and R&D output and productivity are also investigated.Since the study is based on correlational analysis, causal inferences are not drawn. The data indicates that the three indicators are related, but their strength of relationship varies with industries. Growth of sales is related with new products, but not with patents or papers.Although the data point to the fact that small firms are more productive than their larger counterparts, there are many reasons to come to such a sweeping generalisation. Reporting of R&D data is not reliable for small firms as the very definition of R&D differs from firm to firm. Nature of R&D also changes as the firm grows in size; opportunities for patents or new products also change accordingly. These make it difficult to accurately measure and compare the R&D efficiency across firms of different sizes.

The implementation of an Enterprise Resource Planning System (ERP) is a risky and high cost action, even more when we are dealing with small and medium sized enterprises. Although many studies have shown the importance of paying attention to critical success factors in ERP implementations, there is still a high degree of failures and bad experiences around ERP implementations. Most literature has shown experiences of success and failure coming from large sized firms. But there is a lack of information of what has happened in the area of small and medium size firms, and for some economies, they are essential. In this chapter, we try to show a model containing the main elements that can better explain the degree of success and of failure in ERP implementations by providing examples mainly affecting to the circumstances of small and medium size firms. In our model, we propose 5 main groups of variables affecting final results in ERP implementations.