Economics and Business Review

Does firm size improve firm growth? Empirical evidence from an emerging economy

Jan Bentzen — 2023-08-28

This study aims to examine the relationship between firm size and firm growth in Vietnam. The literature does not in general give support to Gibrat’s Law stating that the expected increase in firm size is proportionate to its initial size, or that firm growth rates are independent of firm size. The present study relies on a sample of 578 listed Vietnamese companies representing eight different industries and covering the period 2010 to 2020. The analysis reveals that growth in firm revenues does not give support to a hypothesis of independence of initial firm sizes. When the firm size is measured by total assets the opposite result appears, i.e. the Gibrat’s Law is not rejected. When including also the age of the firms in the test methodology the conclusion will be that firm growth – measured by revenue or assets – in all cases will decrease with firm size.

Factors impacting export intensity of SMEs in India

Aditi Goel — 2023-08-28

The aim of the paper is to explore the factors impacting export intensity of SMEs in India. It examines the influence of various firm level variables on export intensity. The sample considered for the study includes 50 SME firms from different industries ranging from equipment and manufacturing to textile. Data for ten years (2011-2020) has been analyzed for drawing relevant results. For regression, Least Square Dummy Variable corrected (LSDVC) estimates have been used to address the issue of heteroskedasticity and autocorrelation issue present in the data. The results arrived at indicate that the expenditure incurred on research and development, selling and distribution acts as an investment which provides returns in terms of better export performance. Also, top managers having international experience can be an important asset for a firm looking for expanding in international market. These results have substantial implications for the management of SME firms.

The choice of external financing source: The role of company size and stock liquidity

Szymon Stereńczak — 2023-09-04

This paper aims to answer whether firms of different sizes and stock liquidities differ in the choice of external sources of financing in companies listed in CEE countries. To this end the net debt issuance is regressed on the financial deficit. In regressions Pecking Order Coefficients are allowed to vary across firms with different sizes and stock liquidities. The results indicate that companies with less liquid shares prefer issuing debt to cover financial deficits more than companies with more liquid shares. This implies that stock liquidity may substitute debt issuance in alleviating the adverse effects of information asymmetry, especially in relatively small companies. This is the first study in which the relationship between liquidity and debt-equity choice is considered solely from a pecking order theory point of view. Also this is the first study in which stock liquidity effects on capital structure are studied in the CEE countries. Research results may point to the advantages of increasing the liquidity of shares which may contribute to reducing information asymmetry and thus a better allocation of resources.

Socio-economic determinants of environmental degradation: empirical evidence for the environmental Kuznets Curve

Ömer Faruk Gültekin — 2023-08-28

The aim of the paper is to examine socio-economic determinants of environmental degradation. The empirical study employs quantile regression which enables separate predictions for different levels of the dependent variable to be made. This study investigated 62 countries from low, middle and some high income countries for 1995-2019. The Environmental Kuznets Curve (EKC) is verified for the aforemented countries in analyzing the relationship between economic growth and carbon emissions using quantile regression. The study also revealed that the schooling rate has a pollution-increasing effect. In addition to the reducing effects of trade openness, democracy, and economic freedom variables on environmental degradation, the opposite effect of life expectancy at birth is observed, increasing environmental degradation. In this context, this paper concluded that the EKC hypothesis is not supported. The government should encourage pollution-reducing policies in low and middle income countries.

New technologies in the financial industry: case of Poland

Małgorzata Iwanicz-Drozdowska — 2023-09-20

This study evaluates the scope and consequences of the application of new technologies (NTs) within the Polish banking and insurance sectors and thus contributes to the knowledge of CEE financial market development. The goal is to understand the implementation of particular NTs in two different sectors and identify the motivations, strategies, phases of realisation and cost efficiency depending on the institution’s size. The detail of the study requires the use of qualitative research methods. In-depth interviews are employed to figure out the criteria based on which decisions to implement NTs are made. The findings indicate that the primary objective of NT implementation is to respond to customers’ needs, followed by cost-cutting and achieving more efficient internal processes. The application of artificial intelligence (AI) and machine learning (ML) in risk management areas is still a work in progress. In the next five years cloud computing is expected to become the most important NT and thus will have to meet numerous regulatory requirements.

Formulary apportionment in the European Union – future research agenda

Markéta Mlčúchová — 2023-08-28

This paper is focused on the Formulary Apportionment, to be used within the European Union, hence, to replace the Separate Accounting and arm’s length principle. Reflecting upon the announced European Commission’s Proposal for new framework for business taxation and the foreseeable upswing of the academic discussion focused on the Formulary Apportionment methodology, this paper represents the first systematic literature review on this topic. The main aim of the paper is to identify the relevant prior research, explore the current literature and develop directions for future research. The study identifies eight main thematic clusters, provides an interpretative framework, and suggests valuable future research directions within each thematic cluster as well as general future research agenda.

The relationship between social capital and economic growth on a provincial and regional basis

Abdulmuttalip Pilatin — 2023-08-28

The aim of this study is to investigate the relationship between economic growth and social capital on both a provincial and regional basis in Turkey during the period of 2007-2018. In the study, in which the social capital index was used as a current and comprehensive variable to represent social capital, the relations between the variables were analyzed with the panel Granger causality test. As a result of the empirical analysis, it was determined that there is a unilateral causality relationship from GDP to SOCAP in 16 provinces, from SOCAP to GDP in 9 provinces, and bilateral causality in 45 provinces. On the other hand, no significant relationship was found in 11 provinces.

Food security of Ukraine: national and global level

Tatyana Melnyk — 2023-09-20

The aim of this paper is to examine the level of food security in Ukraine in comparison to global regions and European countries in the context of the COVID-19 pandemic and the Russian-Ukrainian war. For this purpose a variety of indicators were examined including population dynamics, food balance, FAO indicators and the Global Food Security Index. The results show that in spite of its agricultural potential Ukraine is behind the global and European indicators of food security with the exception of fish products. Barriers to achieving high levels of food security include incomplete legislative reforms, inadequate funding, infrastructure deficiencies, corruption and non-compliance with standards. International cooperation and improved national and regional strategies are needed to overcome the consequences of the war.

Spatial interactions in local public debt. Evidence from Poland

Monika Banaszewska — 2023-09-29

The aim of the paper is to investigate spatial interactions among the debt of 2,442 municipalities in Poland over the period 2005–2020. Using dynamic spatial Durbin model with two-way fixed effects it provides empirical evidence of positive spatial interactions. It is estimated that an increase in debt per capita in a given municipality by PLN 100 leads to an increase in the debt per capita in neighbouring municipalities by PLN 8–10. The result is robust to the various specifications of spatial weight matrix (contiguity vs. inverse-distance with a cut-off). It is also found that municipal debt in Poland suffers from high persistence over time.

Fertility, fiscal deficit, and sustainability of public debt in an endogenous growth model

Hiroki Aso — 2023-09-20

This aim of this study is to construct an overlapping-generations model to clear the effects of fiscal deficit on fertility. We reveal the relation between fiscal deficit and fertility and clarify the mechanism of fiscal deficit reducing fertility. Empirical evidence shows that an increase in debt-GDP ratio mitigated fertility. Our model indicates that fiscal deficit has positive and negative effects on fertility through the change of income tax rate. Numerical simulation shows that an increase in fiscal deficit reduces fertility. Therefore, this result is consistent with the empirical evidence. In addition, this study demonstrates that a steady state would not exist if child allowance for child-rearing costs would exceed the critical level. This result implicated that an expansion of the child allowance aimed for countermeasures to the falling birthrate can make sustainability of public debt unstable. Thus, countermeasures should be formulated to address the falling birthrate depending on the fiscal situation.

Does regional trade integration reinforce or weaken capital mobility? New evidence from four free trade areas

Mehmed Ganic — 2023-08-28

The study aims to empirically determine whether a higher level of trade openness and the presence of better legal protection for investors enhances the impact of trade bloc membership on capital mobility based on four trading blocs: Eurasian Economic Union (EAEU), Central American and Dominican Republic Free Trade Agreement (CAFTA-DR), Central European Free Trade Agreement (CEFTA), and the Pacific Alliance. This study employs the fully modified and dynamic ordinary least squares estimators and a panel quantile regression cointegration estimator. The study finds that a country's affiliation with a trade bloc improves capital mobility in the whole group and EAEU region, low capital mobility in the Pacific Alliance region and moderate low capital mobility in the CAFTA-DR region. The legal protection system alone provided for the investors does not improve the level of capital mobility unless its interaction with investment is included. Also the study reveals that high trade openness does not necessarily lead to better capital mobility for the studied trade blocs.