To investigate the routes toward profitable growth, this study partially replicates and extends work of Davidsson et al. (2009) on firm growth–profitability dynamics with multi-industry data over 66,000 Finnish firms. The results support prior findings initial profitability being more important than growth for achieving high performance in both dimensions. Additional investigations role age siz...

there is little consensus on the corporate diversification-efficiency relationship in the diversification literature. according to the corporate diversification, firms have a tendency to get more market share with diversifying in the local segment or in the international market. theoretically, a contradictory exists between the profitable strategy and the value reducing strategy in the diversif...

This dissertation consists of three separate essays. In the first essay, privatization is found to improve bank performance by both better monitoring of existing firms, and improved selection of new bank clients. Data on firms borrowing from government-owned banks, and firms borrowing from a privatized bank suggest that privatization led to an improvement of 1 to 2 percent in the earnings-per-a...

We show how trade credit use depends on the value of collateral in a repossession, as well as the extent to which firms face adverse selection problems when dealing with an outside investor. The theory explains: why trade credit is short term credit, why firms simultaneously take and extend credit to other firms with similar levels of creditworthiness, why firms whose prospects start to deterio...

Prior work has established that the financing environment can impact firm strategy. We argue that this influence can shape the earliest strategic choices of a new venture by creating a potential tradeo↵ between two objectives: rapid growth and reaping the benefits of a positive reputation (glory). We identify a simple reputation-building strategic choice, naming the firm after the founder (epon...

This paper analyzes the existing asymmetry in the US corporate tax law governing the determination of foreign tax credits earned by US firms with foreign subsidiaries. The existing asymmetry results in the US government de facto holding foreign currency put options against US firms with foreign subsidiaries. Combined with the exchange rate volatility, this tax law asymmetry reduces the effectiv...

This paper discusses the results for Italy of a CDM model (Crepon et al., 1998) further extended with the objective of evaluating drivers and productivity effects of environmental innovations. The particular nature of environmental innovations, especially as regards the need of government intervention to create market opportunities, is likely to affect the way through which they are pursued (in...

We provide novel evidence on how frictions in the financing of working capital amplify and propagate the effect of economic shocks over time. We propose a test for this idea in a situation where firms must pay for inputs in advance of production, and face credit constraints and seasonal variation in profitability. Persistent input price shocks lead to stronger immediate and longer-term drops on...

It is typically less profitable for an opportunistic borrower to divert inputs than to divert cash. Therefore, suppliers may lend more liberally than banks. This simple argument is at the core of our contract theoretic model of trade credit in competitive markets. The model implies that trade credit and bank credit can be either complements or substitutes. Among other things, the model explains...

This paper investigates whether proximity to institutional shareholders influences corporate policies. We find that firms with high local institutional ownership are more profitable, less risky, and have a better governance structure. Specifically, these firms are less likely to engage in undesirable corporate activities such as aggressive earnings management or option back-dating and are there...