Speaker: Prof. Cihan Artunç, Department of Economics, Eller College of Management, University of Arizona
Presentation Title: Commercial Expansion and Churning across the Business Cycle: Enterprise Organization in Egypt between 1911 and 1948
Abstract: This paper explores business expansion and contraction in Egypt between 1910 and 1949 in response to the changes in the macroeconomic environment. I show that partnership formations and dissolutions was pro-cyclical but partnership size and capitalization were counter-cyclical. Corporation entry and exit had no strong association with the business cycle conditions but their startup capitalization was substantially pro-cyclical. I draw three broader conclusions. First, most commercial expansion took place on the extensive margin; booms led to the creation of more firms, which typically had lower capitalization and fewer partners. This is consistent with the theory of costly entry in the presence of financial frictions. Expansionary periods lowered the productivity threshold for entry, increasing the number of entrant by overwhelmingly selecting on low-productivity firms that were smaller and frailer. Second, pro-cyclical churning was a consequence of fast attrition among partnerships, most of which broke up within two years. Third, the different dynamics of corporations were consequences of the concessionary system of incorporation, which required special permission from the government.
Bio: Cihan Artunç is an assistant professor in the Department of Economics at the Eller College of Management, University of Arizona, where he has been a faculty member since 2014. Artunc completed his Ph.D. in Economics at Yale University in 2014. His research interests include economic implications of legal rules, legal forms of firm organization, corporate governance, legal reform and transplantation of law, with a particular focus on the Ottoman Empire and Egypt between 1800 and 1950. Artunc’s research is supported by the National Science Foundation under grant number SES 1559273.