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Most analyses of tax evasion examine individual behavior, not firm behavior, given obvious and recognized data issues. We use data from the Business Environment and Enterprise Performance Survey to examine tax evasion at the firm level, focusing on a novel determinant of firm tax evasion: the financial constraints (or credit constraints) faced by the firm. Our empirical results indicate across a range of alternative specifications that more financially constrained firms are more likely to be involved in tax evasion activities, largely because evasion helps them deal with financing issues created by financial constraints. We further show that the effects of financial constraints are heterogeneous across firm ownership, firm age, and firm size. Lastly, we present some suggestive evidence on the possible channels through which the impact of financial constraints on firm tax evasion may operate, including a reduction of information disclosure through the banking system, an increase in the use of cash for transactions, and an increase in bribe activities in exchange for tax evasion opportunities.

This paper provides new evidence about the link between firm-level total factor productivity (TFP) and stock returns. We estimate firm-level TFP and show that it is strongly related to several firm characteristics such as size, the book-to-market ratio, investment, and hiring rate. Low productivity firms earn a significant premium over high productivity firms in the following year, and this premium is countercyclical. We show that a production-based asset pricing model calibrated to match the cross section of measured firm-level TFPs can replicate the empirical relationship between TFP, many firm characteristics, and stock returns. Our results offer an explanation as to how these firm characteristics rationally predict returns. This paper was accepted by Wei Jiang, finance.

This article studies the impact of distortions in the access to international capital markets on competition and productivity. I show that a reduction in these distortions leads to an increase in aggregate productivity through two different channels. First, firms that were previously credit constrained respond to better financing terms by increasing their investment in technology, a reallocation effect. Secondly, non-constrained firms also expand their investment in technology because of increased competition, a pro-competitive effect. I provide evidence for these two channels using firm-level census data from the deregulation of international financial flows in Hungary.

We explore current interpretations of firm-level dispersion in revenue-based productivity measures. Since revenue function estimates using proxy methods differ from factor elasticities, the residual emerging from this method remains a combination of demand and technical effciency shocks, and is not equal to the concept of revenue productivity that plays an important role in recent literature on misallocation. This has implications for applications where measured revenue productivity dispersion is used as an indicator of misallocation. Our empirical evidence suggests, under iso-elastic demand, measured dispersion may indicate either distortions or variation in demand shocks and technical effciency or all of the above.

We investigate whether firm-level political risk affects corporate cash holdings. Taking a sample of 5424 US firms with 129,750 firm-quarter observations from 2002Q1 to 2021Q3, we find that cash holdings is higher for firms with greater exposure to firm-level political risk. The positive relationship between firm political risk and cash holdings is consistent for financial constraint and non-constraint firms, high and low growth firms, pro-cyclical and counter-cyclical and competitive industries. Further, our findings are consistent to alternative measures of firm-level political risk and cash holdings. In addition, our findings remain robust with different endogeneity tests: a natural experiment, an instrumental variable approach, and a propensity score matching. Overall, we present novel evidence on the determinants of corporate cash holdings.

PurposeDo financial services needs depend on the firm size? To highlight the impact of different categories of financial services on firm performance, we establish a correspondence between financial services and firms' performance classified according to their size, controlling with the determinants of firm performance and the obstacles that hinder the development of each category of firm.Design/methodology/approachWe have mobilized microeconomic data on 78,629 firms stratified by size and covering 135 countries, extracted from the Enterprise Surveys database. A two-stage least squares (2SLS) regression analysis with instrumental variable modeling is used.FindingsOur empirical results show that a firm's financing behavior differs according to its size. For micro and small firms, the availability of internal financing has a positive impact on their performance. For medium-size firms, the use of debt stimulates firm performance. For large firms, the positive effect of debt diminishes as the level of debt increases, which leads this category of firms to increase their capital. We complemented our study by exploring the issue of whether barriers to firm performance differ by size. Our results bring a support to the idea that medium-size firms suffer more than micro, small, and large firms. The size of this category of firms does not allow them to operate in the informal sector as micro and small firms do, and does not allow them to influence political authorities to operate in their favor as large firms do.Originality/valuePrevious studies have focused on investigating the effects of access to finance and/or financing constraints on firm's performance, neglecting the issue of identifying which financial services have the most impact on firm performance depending on firms' size. This study fills the gap in the literature in two main ways. First, we identify the financial services that have the most impact on firm performance using firm-level data covering 78,629 firms by size (micro, small, medium, and large). Second, we investigate the different barriers to firm performance by size.

According to one perspective, organizations will only be sustainable if the dominant neoclassical model of the firm is transformed, rather than supplemented, by social and environmental priorities. This article seeks to develop a \"sustainability business model\" (SBM)—a model where sustainability concepts shape the driving force of the firm and its decision making. The SBM is drawn from two case studies of organizations considered to be leaders in operationalizing sustainability and is informed by the ecological modernization perspective of sustainability. The analysis reveals that organizations adopting a SBM must develop internal structural and cultural capabilities to achieve firm-level sustainability and collaborate with key stakeholders to achieve sustainability for the system that an organization is part of.

Oil price shocks are known to affect the financial sector of the economy, due to the inflationary effects, and increasing costs of doing business they create. Though oil-shocks and financial markets are widely researched, there remains scope for deeper understanding using firm level data. We therefore contribute to the literature by extending widely applied multi-factor asset pricing models to a sample of 963 Chinese firms (between 2005–2013) to (i) systematically evaluate their reactions to oil price shocks, and (ii) further include regulated gasoline prices as a more direct measure of the energy-prices faced by firms. 89.2% of firms are susceptible to oil shocks, with positive and negative reactions observed even for firms within the same industry. Gasoline price shocks are more pervasive, affecting 95.7% of firms. Considering oil and gasoline separately allows us to review gasoline price regulation in China, which ultimately appears ineffective in achieving its intended goals.

Theoretically, instability and violence should deter foreign investment. Empirically, the evidence has been inconsistent. I highlight two key deficiencies in existing research, and present a more nuanced theoretical framework for considering this relationship. First, I make the case that the costs and risks associated with conflict are a function of both intensity and duration. Both should be accounted for. Second, I argue that the logic governing multinational corporations' (MNC) behavior changes post-entry into the host country. Combining these two insights, I argue that firms' sensitivity to conflict, and that the particular signals they respond to, vary in predictable ways across different stages of the FDI lifecycle. I test the according hypotheses using firmlevel foreign investment data, and find supporting evidence. Multinationals look for sustained peace when pursuing new ventures, but prove resilient to all but the most intense and persistent conflicts after the costs of entry have been sunk.

This paper analyzes how idiosyncratic risk, measured by the variance of firm-level idiosyncratic shocks, affects long-run growth when bankruptcy costs are present. These costs are incurred by creditors during the bankruptcy procedure of failing firms. In an endogenous growth model with bankruptcy costs where firms privately observe the outcome of idiosyncratic shocks, an increase in idiosyncratic risk reduces long-run growth. This happens because, when bankruptcy costs are present, higher idiosyncratic risk enlarges the wedge between the rental rate of capital and its marginal product, thereby slowing down capital accumulation. This growth-reducing effect of idiosyncratic risk is stronger when bankruptcy costs are higher. Empirical support for these propositions is provided in a growth regression that exploits cross-country variations in the dispersion of firms’ real sales growth as a proxy for idiosyncratic risk along with recovery rates as a measure that proxies the inverse of bankruptcy costs.