Projects / Programmes
When is blockholding growth enhanced?
| Code |
Science |
Field |
Subfield |
| 5.02.01 |
Social sciences |
Economics |
Economy sciences |
| Code |
Science |
Field |
| S180 |
Social sciences |
Economics, econometrics, economic theory, economic systems, economic policy |
| Code |
Science |
Field |
| 5.02 |
Social Sciences |
Economics and Business |
Macroprudentian regulation, concentrated ownership, credit as a source of financing, state subsidies
Researchers (10)
Organisations (2)
Abstract
The term macroprudential regulation marks an approach to regulation, which aims to mitigate the risk of the financial system as a whole. The modern crisis (2008) increased the consensus among policymakers and economic researchers that it is necessary to alter the regulatory framework towards a macroprudential perspective. Thus, the key question became which macroprudential policy instruments to use for the recovery, after the biggest financial crisis since the Great Depression, to be robust. The research project addresses three areas that are key to achieving macroeconomic stability (not only in Slovenia), and which area’s editing falls within the framework of macroprudential regulation (Stiglitz, Greenwald, 2014). These areas are: 1) blockholding as the dominant form of ownership of companies; 2) the reduction of bank loans to new corporate investment; 3) state subsidies.
The area of concentrated ownership and its role in the modern economy has come to the fore in the last two decades in the field of economics (Holderness, 2003). Nevertheless, the current literature on blockholding and multiple controls and their influence on efficiency of firms does not follow the growing interest and need for a deeper understanding of the phenomenon. Therefore, this project area will pursue the following three main objectives: 1) developing a theoretical model of an effective minimum control coalition; 2) analyzing differences in total factor productivity (TFP) between firms with different types of minimum controlling coalitions and also firms with dispersed ownership in Slovenia in the period 2006-2016; 3) analyzing debt (de)accumulation between firms with different types of minimum controlling coalitions in Slovenia in the period 2006-2016. The area of reduced bank lending to corporate investments (especially to SMEs) has an important impact on the macroeconomic environment, as investments represent the most volatile component of gross domestic product. The research project will make an important contribution to the existing literature by looking at what drives the supply of bank credit to households and firms in emerging economies before and during the turmoil of the latest financial crisis, as well as its aftermath. This will be done by pursuing the following objectives: 1) the development of a theoretical model that will be based on the tradition of Mundell and Fleming (Mundell, 1963; Fleming, 1962, Dornbusch, 1976) and will include banks as intermediaries; 2) the identification of the role of capital inflows in the period of economic boom and the massive reversal of capital; 3) the identification of the main drivers of excessive bank lending; 4) the identification of supply-side factors’ effects, demand-side factors’ effects, and country specific effects on firm and household credit growth. The discussion regarding state subsidies re-emerged in the last decade, mostly being initiated by an increasing awareness of climate change (Aghion et al., 2011). Also, the crisis showed that markets were not necessarily efficient and, indeed, there was a broad consensus that without strong government intervention – which includes lifelines to certain firms and certain industries –many developed economies in Europe and the US may have collapsed (Stiglitz and Greenwald, 2014). The research project will have significant contributions in the fields of subsidies, the comparison of different subsidy policies, and the impact of subsidies on the adjustment process during the business cycle.
All three presented areas of research are intertwined and represent important pieces in the puzzle of macroeconomic stability.
Significance for science
The research project will be an important contribution to the development of science due to both its design and wealth of data. Up until now, the predominant view of mainstream economic science is based on the comprehensive power of the market and the use of non-discriminatory rates of economic policy (interest rates). This sort of economic science shows its weaknesses in its attempt explain the emergence of the modern crisis and while also trying to find the way for the recovery. Therefore, economic science started searching for alternative views on the intervention instruments. Besides price stability, there are other social goals stepping into the foreground. Such goals include continuing robust economic and employment growth, ensuring the macroeconomic stability of financial systems, and keeping a more balanced distribution of income and wealth. We name the intervention instruments for reaching these goals as macroprudential regulation. In the research project, we consider three fields that present the project’s core function: 1) blockholding as a prevailing ownership structure in small and medium-sized enterprises; 2) the role of credit in financing new investments; and 3) the role of state subsidies. We note an overall lack of theory and empirical findings in all three fields. Our role from the side of a theoretical and empirical view will be to shed light on the knowledge of each of these three fields and contribute to modern science. Our advantage is in the unique databases we will use while researching all three fields. In the field of enterprise ownership, we will use a database of Slovenian enterprises during the period 2006-2016. We will take into consideration all enterprises that either employ 50 employees or hold at least two million euros worth of assets (these are two statutory criteria that define a small and medium-sized enterprise), and will obtain data from different sources. We will collect data on the ownership shares of the ten largest owners of each enterprise in every observable year. The database will thus contain the data of approximately 4,500 enterprises per year. In the field of bank lending, we will create a database to cover the data of approximately 60 banks from the countries under consideration. The data for state subsidies will consist of the balance sheet data of the enterprises, the ownership structure of the enterprises, and state subsidies at the enterprise level. We will obtain the balance sheet data from the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES) and will cover the period 1996-2015. We will obtain the data on state subsidies at the enterprise level from the Ministry of Finance of the Republic of Slovenia (MF) for the period 1998-2014.
Significance for the country
In searching for an appropriate framework for decision-making in the global economy, both the EU in general and Slovenia are in the spotlight of current events. Knowledge in the field of macroprudential regulation in each of the three areas concerns the decision makers that shape the economic conditions for enterprises (economy). This is particularly true of an open economy such as the Slovenian economy. More in-depth knowledge about the ownership structures of enterprises, credit as a source of enterprises’ financing, and the influence of the state subsidies is important to decision makers. Their main criteria for decision-making are to ensure social goals. However, the results will be important for enterprises, which in their operations follow their private goals. Our research will therefore have an important effect also on the Slovenian society.
Most important scientific results
Interim report,
final report
Most important socioeconomically and culturally relevant results
Interim report,
final report
