An analysis of the length of labour and financial contracts: a study for Spain.

This study investigates the connection between the duration of financial contracts and that of labour contracts. Workers with long-term contracts have incentives to invest in training. This makes them attractive to the entrepreneur. Furthermore, this behaviour will be reinforced if financial contracts are long-term, because it reduces the probability of an early liquidation as well as the dismissal of trained workers. As a conclusion, significant increases in the length of financing contracts should be accompanied by corresponding increases in the length of labour contracts. Support for this theoretical contention is found by testing it on a dataset composed of Spanish manufacturing firms for the period 1991–2000.

Ownership structure and inventory policy.

This paper makes use of a database of Spanish manufacturing firms to explore the effect of a firm's ownership structure on its inventory policy. We have argued that the presence of institutional investors reduces a firm's liquidity needs and prevents overinvestment policies. This, in turn, leads to lower equilibrium inventory levels. Also, we expect, on average, less inventory investment when bank-equity financing is compared with bank-debt financing. Finally, other components of ownership structure like the number of blockholders prevent inventory overinvestment. This may have an impact on the economic cycle as more firms are floated on the stock market hence changing their ownership structure.Inventories; Main blockholders; Financial institutions;

Inventories, financial structure and market structure.

In this paper, we study the effect of different financial contracts on the firm's inventory policy. Doing so will allow to define the best financial instruments to diminish the stock variability of a profit-maximizing firm in a given economic environment (expansion or recession), and for a given market structure. We show that in periods of recession (expansion), reducing (increasing) the amount of short-term debt is an optimal strategy independently of the market structure.Inventories; Financial structure; Market structure;

OWNERSHIP STRUCTURE AND INVENTORY POLICY

This paper explores the effect of a firm’s ownership structure on its inventory policy. We have argued that the presence of institutional investors like banks as blockholders, reduces a firm’s liquidity needs and prevents overinvestment policies. This, in turn, leads to lower inventory levels, especially for small and/or diversified firms. Also, we expect less inventory investment when bank equity financing is compared with bank debt financing. Finally, other components of ownership structure like the number of blockholders prevent overinvestment that may generate excessive inventory accumulation. We have proved these theoretical contentions making use of a database of Spanish manufacturing firms.

Exploring the Antecedents of Potential Absorptive Capacity and its Impact on Innovation Performance.

This paper builds upon the theoretical framework developed by Zahra and George [Absorptive capacity: a review, reconceptualization, and extension. Academy of Management Review 2002;27:185–203] to empirically explore the antecedents of potential absorptive capacity (PAC), i.e. the ability to identify and assimilate external knowledge flows. Based on a sample of 2464 innovative Spanish firms, we find evidence that R&D cooperation, external knowledge acquisition and experience with knowledge search are key antecedents of a firm’s PAC. Also, during periods of important internal reshaping, when there are significant changes in strategy, design of the organization and marketing, firms exert more effort to accumulate PAC. Finally, we find that PAC is a source of competitive advantage in innovation, especially in the presence of efficient internal knowledge flows that help reduce the distance between potential and realized capacity.Knowledge management; Innovation; Absorptive capacity;

Managerial Entrenchment and Corporate Social Performance.

We examine empirically the relationships amongst managerial entrenchment practices, social performance, and financial performance.We hypothesize that entrenched managers may collude with non-shareholder stakeholders in order to reinforce their entrenchment strategy; this is particularly so in firms that have efficient internal control mechanisms. Moreover, we prove that the combination of entrenchment strategies and the implementation of socially responsible actions have particularly negative effects on financial performance. We test these contentions with a sample of 358 companies, from 22 different countries, for the period 2002–2005.Corporate governance; Corporate social performance; Earnings management; Stakeholder activism;

R&D INVESTMENT AND FINANCIAL CONTRACTING IN SPANISH MANUFACTURIG FIRMS

This paper presents a model in which a firm with a degree of R&D specialization raises external funds to develop a two-period project that involves some non-verifiable returns (R&D-type of project). Taking into account a possible opportunistic behavior by the manager, we find out that the optimal firm's debt equity ratio is negatively related to the firm's degree of R&D specialization, its internal funds, and the output generated by the R&D project. Moreover, the expected R&D output of the firm is related negatively to the firm’s leverage and positively to the firm’s degree of R&D specialization as well as the amount of internal funds. The novelty of this work is to derive these results from strategic default consideration of the managers of firms specialized in R&D investments, as opposed to the standard collateral arguments concerning debt financing. This has a consequence of a lower growth of the firm’s debt-equity ratio once we compare firms specialized on R&D investments with others non specialized in these activities. We confirm our main theoretical findings making use of a Spanish data set of manufacturing firms during the period 1990-94.

Is managerial entrenchment always bad? A CSR approach

In this paper, we argue that managerial entrenchment may be positive when there is excessive external pressure from financial markets. In these situations, managers have more freedom to implement value-enhancing strategies, such those related to corporate social responsibility (CSR) activities. This is a good-type of entrenchment. On the other hand, when the external pressure is not so high, given that the pressure is from inside the firm, managerial entrenchment is bad and the use of CSR investments may exacerbate the agency problem. We prove this claim in an empirical study conducted of 279 international firms that operate in 22 different countries for the period 2002-2005. These firms participate in two different institutional contexts: that of the Anglo-Saxon countries, where the pressure of financial markets is intensive, or that of the Continental European countries in which the corporate control mechanisms are mainly internal.

MANAGERIAL TURNOVER AND WORKER TURNOVER

We study the influence of the manager's degree of consolidation within the firm over the firm's labor policy. We argue that non-consolidated (recently-appointed) managers are more worried about short-term results than consolidated managers are. This feature leads the former to bias the labor contracting favoring short-term contracts. This has two main consequences. First, a higher variation in the number of workers hired in each period. And second, a lower increase in unitary labor costs. To contrast these results, we use a database of 1.054 Spanish companies during the period (1994-98), and analyze their managerial turnover as well as their corresponding variation in the number of workers and in unitary labor costs. The theoretical results are confirmed, especially for highly-productive (R&D-intensive) firms.

BANK DEBT AND MARKET DEBT: AN EMPIRICAL ANALYSIS FOR SPANISH FRIMS

This paper examines the effect on the firm’s banking cost of the issue of debt securities. We argue over the existence of a positive relationship between the issue of market debt and the reduction of firm’s banking cost. This idea relies on three main arguments: i) Banks can delegate to investors the supervision task, a feature that makes bank supervision less costly. ii) The issue of public debt increases firms’ bargaining power in front of the banks, as the former can get funds through non-bank financing ch annels. iii) Banks with no prior information on the issuing firm may interpret the issue of debt securities as a positive signal of firm’s quality. Additionally, we argue that the previous effects are less important for non-first issues and are sensible to the maturity of the bond issued. We empirically test these and other related theoretical results making use of a database of Spanish non-financial firms during the 1993-1998 period. We find empirical support for our theoretical contentions.