Headlines 2015

What might affect employees – and firms?

2015-08-07


August 6-7, a scientific workshop on the subject “economics of corporate ownership” was organized by the Research Institute of Industrial Economics (IFN). During two days in Vaxholm, just outside of Stockholm, specially invited researchers from Europe and the US discussed subjects related to the real economic effects of ownership forms and changes in ownership. In total, thirteen studies were presented.

How do changes to ownership affect employees?

The relationship between ownership form and employees was the focus of several studies. As the share of private equity firms has steadily increased during the last years, Martin Olsson (IFN) showed how a buyout by a private equity firm affects different categories of employees. In the study, co-authored with Joacim Tåg (IFN), the researchers show that, in low-productivity firms, employees that perform routine tasks and tasks that are easily outsourced, run a higher risk of losing their jobs. For employees that perform more complex tasks the circumstances are the inverse, they are less likely to lose their jobs.

 

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From left Gordon Phillips, USC Marshall School of Business, Stefan Zeume, Stephen M. Ross School of Business, Alexander Ljungqvist, NYU and Martin Olsson, IFN.

 

Andrew Ellul (Kelley School of Business) examined differences in work- and wage insurances in an international study, and found that family owned firms are more stable employers than non-family owned firms, as the staff turnover rate is lower. This security is however balanced by the fact that employees in family-owned firms on average earn five percent less than employees in other types of firms.

Paige Ouimet (Kenan-Flagler Business School) presented a study about acquisitions that are carried out in order to acquire the employees in the target company. The researchers confirm the hypothesis that acquisitions are done with the partial motivation of acquiring competent staff, and that these individuals are more likely to continue working in the company after the acquisition.

 

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Andrew Ellul, Kelley School of Business, talking about research results with Marc Martos-Vila, London Business School, Gordon Phillips, USC Marshall School of Business and Carl-Magnus Bjuggren, IFN.

 

The value of independent board members

Gustavo Manso (Haas School of Business) presented work on how insisting on higher requirements for independent board members caused a reduction of high-technological advances in terms of registered patents. The authors showed in their study that the new regulation resulted in a higher total number of patents, but a lower number of breakthrough patents. Manso and his coauthors argue that the increased monitoring, stemming from independent board members, results in less flexibility and more risk aversion in the companies’ management, which in turn explains the lower number of breakthrough patents.

 

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The discussions and exchange of views were many in Vaxholm, from left Martin Strieborny, Lund University, Daniel Ferreira, London School of Economics, Andrew Ellul, Kelley School of Business samt Marc Martos-Vila, London Business School.

 

Innovation and technology were two key topics throughout the conference. Daniel Ferreira (London School of Economics) presented a study also related to independent board members. In his paper the focus was on the effect that a failed loan covenant has on the number of independent board members. By using empirical data, the authors show that the number of independent board members increases with thirty percent following a failed loan covenant. This indicates that independent board members can have a monitoring function, on behalf of creditors vis-a-vis the company, as a result of the creditors lack of trust in relation to the management.

 

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In this photo can be seen: Elena Simintzi, Sauder School of Business, Johan Hombert, HEC Paris and Martin Schmalz, Stephen M. Ross School of Business.

 

Owner-level taxes and tax havens

Tax related questions were also an important ingredient at the conference. Magnus Henrekson (IFN) presented a new paper that investigates the link between owner-level taxes and economic activity. The authors argue that economic models have treated owner-level taxes in a too simplistic manner, and that these in fact have a significant effect on entrepreneurship, risk-taking and success. High owner-level taxes make entrepreneurs with high alternative costs less likely to start new companies and makes it harder to attract the necessary competencies to the newly started firm.

In another tax-related study Stefan Zeume (Stephen M. Ross School of Business) analyzed tax evasion by companies in 52 countries. He found that a reduction of the corporate tax rate by one percentage point results in an increase in company value by 1.2 percent, i.e. if the company does not have a subsidiary in a tax haven. If a company has a subsidiary located in a tax-haven, a reduction in the corporate tax rate has no effect on the company valuation. In addition to this, the authors show that when countries sign a Tax information exchange agreement, the company valuation increase. This increase is higher for companies with greater involvement in tax havens.

Text and photos: Arvid Hedlund

 

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Networking is an integral part of a research conference. In the photo can be seen: Martin Olsson, IFN, Elena Simintzi, Sauder School of Business, Joacim Tåg, IFN, Martin Schmalz, Stephen M. Ross School of Business, Alexander Ljungqvist, NYU, Magnus Henrekson, IFN, Lars Persson, IFN samt Enrico Perotti, University of Amsterdam.


About fifteen researchers from abroad participated in the conference:
Andrew Ellul (Kelley School of Business),  Daniel Ferreira (London School of Economics), Johan Hombert (HEC Paris), Alexander Ljungqvist (New York University /IFN), Gustavo Manso (Haas School of Business), Marc Martos-Vila (London Business School), Paige Ouimet (Kenan-Flagler Business School), Gordon Phillips (USC Marshall School of Business), Enrico Perotti (University of Amsterdam), Martin Schmalz (Stephen M. Ross School of Business), Elena Simintzi (Sauder School of Business) och Stefan Zeume, (Stephen M. Ross School of Business).

Participants from IFN:
Carl Magnus Bjuggren, Magnus Henrekson, Martin Olsson, Lars Persson, Johanna Rickne and Joacim Tåg.

Program

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se