Strategic Management during the Financial Crisis: How Firms Adjust their Strategic Investments in Response to Credit Market Disruptions

Flammer, C and Ioannou, I (2021) Strategic Management during the Financial Crisis: How Firms Adjust their Strategic Investments in Response to Credit Market Disruptions. Strategic Management Journal, 42 (7). pp. 1275-1298. ISSN 0143-2095

Abstract

This study investigates how companies adjusted their investments in key strategic resources—i.e., their workforce, capital expenditures, R&D, and CSR—in response to the sharp increase in the cost of credit (the “credit crunch”) during the financial crisis of 2007-2009. We compare companies whose long-term debt matured shortly before versus after the credit crunch to obtain (quasi-)random variation in the extent to which companies were hit by the higher borrowing costs. We find that companies that were adversely affected followed a “two-pronged” approach of curtailing their workforce and capital expenditures, while maintaining their investments in R&D and CSR. We further document that firms that followed this two-pronged approach performed better post-crisis.

More Details

Item Type: Article
Subject Areas: Strategy and Entrepreneurship
Additional Information:

© 2020 Wiley. This is the peer reviewed version of the following article: Flammer, C. and Ioannou, I. (2020), 'Strategic Management During The Financial Crisis: How Firms Adjust Their Strategic Investments In Response To Credit Market Disruptions'. Strategic Management Journal which has been published in final form at https://doi.org/10.1002/smj.3265. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions

Date Deposited: 06 Jan 2021 18:10
Date of first compliant deposit: 04 Jan 2021
Subjects: C > Crises
S > Strategic planning
I > Investment appraisal
Last Modified: 20 Sep 2021 00:23
URI: https://lbsresearch.london.edu/id/eprint/1619
More

Export and Share


Download

Accepted Version - Text
  • Restricted to Repository staff only

Statistics

Altmetrics
View details on Dimensions' website

Downloads from LBS Research Online

View details

Actions (login required)

Edit Item Edit Item