Conference Agenda

Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).

Session Overview
Room D: CFG 4
Friday, 26/Mar/2021:
4:40pm - 6:00pm

Session Chair: Daniel Metzger, Erasmus University Rotterdam

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Endogenous Operating Leverage: Foreign Labor Regulations and Firm Boundaries

Katie Moon2, Giorgo Sertsios1

1Universidad de los Andes, Chile; 2University of Colorado Boulder, United States of America

Discussant: Daniel Metzger (Erasmus University Rotterdam)

How do firms manage their operational leverage? We study this question in the context of U.S. multinationals facing changes to foreign labor protection laws. We find that U.S. firms facing higher labor protection in foreign countries are more likely to replace their integrated business relations with arm's-length relations in those nations. This is consistent with the idea that when firms find it harder to terminate their workers in integrated operations, they change their operating model to one where it is easier to replace or discontinue business partners instead of employees. We also find that when foreign labor protection increases, firms face increased competition in foreign countries and reduce their overall capital expenditures. However, they do not adjust their financial leverage in response. Our findings showcase that firms offset the inflexibility from rigid labor market regulations by restructuring their real-side operations.

Pirates without Borders: the Propagation of Cyberattacks through Firms’ Supply Chains

Matteo Crosignani1, Marco Macchiavelli2, Andre Silva3

1Federal Reserve Bank of New York, United States of America; 2Board of Governors of the Federal Reserve System, United States of America; 3Board of Governors of the Federal Reserve System, United States of America

Discussant: Andreas Milidonis (University of Cyprus)

We document the propagation through supply chains of the most damaging cyberattack in history and the important role of banks in mitigating its impact. Customers of directly hit firms saw reductions in revenues, profitability, and trade credit relative to similar firms. The losses were larger for customers with fewer alternative suppliers and suppliers producing high-speci city inputs. Internal liquidity buffers and increased borrowing, mainly through bank credit lines, helped affected customers maintain investment and employment. However, the shock led to persisting adjustments to the supply chain network.

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