Editorial

Welcome to the first issue of the International Journal of Management and Economics in 2023. The current issue contains six papers covering various areas in management, economics, and finance. Four of them are based on original empirical research. There are also two conceptual papers. The geographical scope of this issue is Europe, with a particular perspective on Poland, as well as West Asia with a particular focus on Abkhazia and South Ossetia; and there are also aspects with potentially global application.

This issue starts with the paper entitled “Labor Market Effects of COVID-19 Supply Shocks,” by Georg Stadtmann, Michael Frenkel, and Lilli Zimmermann. In their original conceptual design, the authors use a standard wage setting–price setting model of the labor market and study the transmission of the shocks on the natural rate of unemployment and production. In a first step, the shocks are analyzed in a general way, graphically and algebraically. In further analysis, the authors use numerical examples to illustrate the effects on the real wage and the labor market equilibrium, as well as output. The theoretical results indicate that the negative supply shock related to the COVID-19 pandemic was associated with a deteriorating effect on the natural level of output and employment. These results are in line with empirical evidence across various countries for the pandemic period. However, the authors humbly admit that there are some considerable limitations to their theoretical model that also need to be taken into account.

Elżbieta Bukalska and Anna Maziarczyk in their article entitled “Impact of financial constraints and financial distress on cash holdings” examine the impact of financial constraints and financial distress on cash holdings, both in normal and crisis times. The research is based on a large sample of 4,406 firm-year observations of companies listed on the Warsaw Stock Exchange (WSE). The study shows that companies maintain higher cash holdings during a crisis than in a normal period. However, companies with financial difficulties (constraints and distress) have lower cash holdings both in normal and crises times. The authors argue also that cash holdings have recently increased their meaning as we face the situation of constant and increasing uncertainty: still ongoing COVID-19 crisis prolonged with Russian aggression on Ukraine and outburst of inflation.

In the third paper, “Concentration on the market of audit services provided to publicly listed companies: Evidence from Poland,” Jacek Gad studies the level of concentration on the market of audit services and the level of rotation among companies providing audit services to companies listed on the WSE. He finds that over the years from 2011 to 2016, the concentration on the market of auditing services provided to publicly listed companies increased. However, as of 2017, the concentration began to decline. The author argues that this is due to the new regulations on the audit market. The research results also indicate that the level of rotation of audit firms providing services to companies listed on the WSE between 2011 and 2016 was at a similar level and amounted to approximately 20%. A significant change took place at the turn of 2016 and at the turn of 2017. During these periods, the level of rotation increased significantly. This is also attributed to changes in regulations that were supposed to, inter alia, increase the rotation of audit firms. In turn, at the turn of 2018, the turnover level was again approx. 20%. Audit firms appear reluctant to change audited companies. In addition, the study also shows that that there is a kind of sectoral specialization on the Polish market of auditing services provided to public companies. This finding is similar to observations in other countries.

Marzanna Witek-Hajduk and Anna Grudecka in the paper entitled “Ways to neutralize the country-of-origin effect in the emerging market firms international branding” examine the ways to neutralize the country-of-origin (COO) effect (COE) in the emerging market firms’ international branding. They conduct a multiple-case study involving five companies from European and Asian emerging markets, all of which are owners of household appliances brands, and use data sourced from in-depth interviews and secondary sources. The study finds that companies from emerging markets neutralize the genuine COO in their international branding in various ways, e.g., by applying brands’ or sub-brands’ names that do not refer to the genuine country of brand-origin, using slogans in foreign languages, or establishing brand alliances with partners from developed countries.

The next paper, entitled “Merchandise trade of the unrecognised entities in West Asia. The gravity model of trade, including Abkhazia and South Ossetia,” is by Magdalena Suska. She presents the specificity of the economy and merchandise trade of unrecognized entities in the Caucasus region, with particular focus on Abkhazia and South Ossetia. The study also analyzes the potential changes in merchandise trade structure and volume in the period between 2015 and 2020. Over the last years, Abkhazia and South Ossetia have improved their economic condition, increasing industry production, developing services, and maintaining trade exchange with other states. However, as the outcomes of the gravity model of trade indicate, both unrecognized entities do not fully utilize its trade potential, especially with Georgia, Russia, and Turkey. The author argues that legitimizing the trade of Abkhazia and South Ossetia may bring economic benefits not only to both these entities but also to other countries, especially their immediate neighbors.

The final paper of this issue, entitled “Behavioral biases in corporate risk management and investment decisions during the COVID-19 pandemic in Poland,” is by Marcin Rzeszutek, Adam Szyszka, and Szymon Okoń. This is an original conceptual paper that describes the scientific approach and research design of a wider project dedicated to the identification of the behavioral biases of corporate managers during the pandemic, and later to analyzing their aggregated impact on financial market stability and macroeconomic variables. The novelty of the paper lies on the one hand in the use of the behavioral finance framework that is applied to corporate finance; on the other hand, it is also one of very few attempts to translate the behavior of economic agents at the micro level into aggregated data at the macro level. The paper offers an interesting methodological blend: it uses the survey to obtain individual data and later applies agent-based modeling (ABM) in order to simulate how individuals’ behaviors may transform into the aggregated data.

We hope you will find the International Journal of Management and Economics an inspiring source of information. Please enjoy reading!