This paper uses the financial crisis of 2008 as a natural experiment to demonstrate that when measuring investment-cash flow sensitivity, the value of a firm‟s assets that can be used as collateral should be taken into account. Using panel data on U.S. firms from 1990 to 2011, it was found that the share of physical capital in assets has a strong influence on investment-cash flow sensitivity, w...

In contexts where banks have strong control over firms, banking crisis may be associated with merger activity. This is because banks’ risk is reduced when their clients merge, and financial trouble creates strong incentive for banks to facilitate mergers of clients to improve banks’ risk standing. During Japan’s banking crisis in the 1990s, corporate merger activity was correlated with banks’ f...

Multinationals as Stabilizers? Economic Crisis and Plant Employment Growth This paper examines the link between multinational enterprises and employment growth at the plant-level. We investigate in detail the comparative response of multinationals and domestic firms to an economic crisis, using the empirical setting of a well defined case of economic slowdown in Chile as a natural experiment. I...

We examine whether and why the value of diversification changed during the 2008–2009 financial crisis. We find that diversified firms increased in value relative to single-segment firms during the crisis, a result that is not driven by the endogeneity of either financing constraints or firms’ diversification choices. We also find that the increase did not simply reflect changes in investor perc...

Non-arbitrage asset pricing has been an avenue of unending interest to financial academics and practitioners alike. With increased capital outflow being permitted by developing economies, investors now have easy access to securities issued by foreign firms. The issue investigated in this research is concerned with the persistent presence of arbitrage opportunities between depository receipts an...

We argue that decentralization is particularly beneficial to firm performance in “bad times”. We present a model where bad times increase the importance of rapid action, and improve the alignment of incentives of managers within firms. We test this idea exploiting the 2008-2009 Great Recession using firm-level cross country panel data combined with our survey data on firm organization. We find ...

Turnaround time for Papanicolaou (Pap) tests became an important service quality issue at our institution. We studied Pap test turnaround time using engineering process improvement tools and benchmarked turnaround time against data published as a College of American Pathologists Q-Probes study. An IDEF3 process map revealed the complexity of the Pap test process and the opportunities for proces...

This study examines how sudden shrinkage of domestic demand affects firm-level export performance. Using the Asian economic crisis as a natural experiment, we show that while the industrial organization (IO) economics and resource-based view (RBV) apply well in the pre-crisis period, the real options perspective does a better job in explaining firms’ efforts to increase exports in the post-cris...

Many organizational leaders have a laissez faire attitude toward the possibility of a crisis happening in their firm, despite the high probability that every business leader and every organization will experience a crisis of some significance. Consequently, leaders are underprepared not only for “managing” crisis situations when they occur, but also—and more important—for leading organizations ...

This paper examines how devaluations affect the relative cost of labor and capital and therefore influence production levels, profitability, investment decisions, and stock returns for firms in the “crisis” country as well as competitors in the rest of the world. The paper develops these ideas in a small, open-economy model and then performs a series of empirical tests using information for abo...