Département des sciences économiques

Ecole des sciences de gestion

Université du Québec à Montréal

C.P. 8888, Succursale Centre-ville

Montréal, Québec, Canada

H3C 3P8

tel.: +1-514-987-3000-8382#

fax: +1-514-987-8494

sevcik.pavel@uqam.ca

Financial Frictions, Internal Capital Markets, and the Organization of Production (april 2010)

Abstract: Diversified business groups and conglomerate firms account for a large fraction of corporate assets and business activity in many emerging and developed countries. This paper examines whether a model in which business groups partially substitute for imperfect credit market is able to quantitatively explain key stylized facts on the way production is organized, on cross-firm productivity differences, and on cross-country differences in the degree of conglomeration.

Financial Contracts and the Political Economy of Investor Protection (NEW VERSION coming soon)

Abstract: What determines how investor protection varies over time and across countries? This paper studies the political economy of investor protection in a model of capital accumulation and entrepreneurship. Less investor protection implies higher costs of external financing for entrepreneurs. This excludes more financially-dependent agents from entrepreneurship, increasing the profits of the remaining entrepreneurs. The main determinants of political support for high levels of investor protection are the net worth of agents and the expected return from entrepreneurship. The theory generates several implications consistent with stylized facts concerning the joint dynamics of investor protection and economic development.

Cheap Talk, Gullibility, and Welfare in an Environmental Taxation Game (with Herbert Dawid and Christophe Deissenberg, published in “Dynamic Games: Theory and Applications”, Haurie and Zaccour Eds., GERAD, Springer 2005)

Abstract: We consider a simple dynamic model of environmental taxation that exhibits time inconsistency. There are two categories of firms, Believers, who take the tax announcement made by the Regulator to face value, and Non-Believers, who perfectly anticipate the Regulator’s decisions, albeit at a cost. The proportion of Believers and Non-Believers changes over time depending on the relative profits of both groups. We show that the Regulator can use misleading tax announcements to steer the economy to an equilibrium that is Pareto superior to the solutions usually suggested in the literature. Depending upon the initial proportion of Believers, the Regulator may prefer a fast or a slow speed of reaction of the firms to differences in Believers/Non-Believers profits.

Plant Size, Productivity, and the Efficiency of Corporate Diversification (NEW VERSION November 2011)

Abstract: Abstract This study examines the relationship between plant productivity, size, and the organizational structure of firms in the Canadian manufacturing sector in order to assess the efficiency of conglomerates. Small plants in conglomerates are less productive than small plants in single-segment firms, but large plants in conglomerates are more productive than large plants in single-segment firms. This is shown to be consistent with conglomerates allocating resources to individual plants more efficiently than external markets. Efficient internal markets favor conglomerates in industries with high financial dependence and high use of relationship-specific inputs, but their complex organizational structure is a disadvantage in skill and management intensive industries.