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Spring Forward or Fall Back? The Post-Crisis Recovery of Firms

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  • Leandro Medina

Abstract

This paper studies corporate performance in the aftermath of the global crisis by examining 6,581 manufacturing firms in 48 developed and developing countries in 2010, identifying factors of resilience as well as vulnerability. Based on a cross-sectional analysis, the results show that pre-crisis leverage and short-term debt have had negative effects on the speed of the recovery, while asset tangibility has had positive effects. The negative effect of leverage is non-linear, being particularly strong in firms with high pre-crisis leverage. Furthermore, the effects are different for advanced and emerging market economies. The paper also shows that the macroeconomic framework critically matters for firm growth. In particular, in countries that have allowed the exchange rate to depreciate, firms have had a faster recovery in sectors highly dependent on trade.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/292.

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Length: 31
Date of creation: 12 Dec 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/292

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Related research

Keywords: Corporate sector; Emerging markets; Developed countries; Exchange rate regimes; Global Financial Crisis 2008-2009; Economic recovery; firm resilience; international finance; leverage; corporate performance; trade.; short-term debt; pre-crisis; competitiveness; recessions; exchange rate movements; external financing; impact of recessions; trade effects; global exports; post-crisis recovery; financial crises; international trade; global recession; transition countries; trade flows; trade dependence; asian financial crisis; measure of trade; trade channels; financial distress; competitiveness of firms; commodity trade; trade volumes; external finance; trading partners; world trade; crisis episode;

References

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  1. Stijn Claessens & Luc Laeven, 2003. "Financial Development, Property Rights, and Growth," Journal of Finance, American Finance Association, vol. 58(6), pages 2401-2436, December.
  2. Lang, Larry & Ofek, Eli & Stulz, Rene M., 1996. "Leverage, investment, and firm growth," Journal of Financial Economics, Elsevier, vol. 40(1), pages 3-29, January.
  3. Prakash Kannan, 2010. "Credit Conditions and Recoveries From Recessions Associated with Financial Crises," IMF Working Papers 10/83, International Monetary Fund.
  4. Nigel Driffield & Sarmistha Pal, 2007. "How Does Ownership Structure Affect Capital Structure and Firm Value? Recent Evidence from East Asia," CEDI Discussion Paper Series 07-04, Centre for Economic Development and Institutions(CEDI), Brunel University.
  5. Claessens, Stijn & Tong, Hui & Wei, Shang-Jin, 2012. "From the financial crisis to the real economy: Using firm-level data to identify transmission channels," Journal of International Economics, Elsevier, vol. 88(2), pages 375-387.
  6. Coricelli, Fabrizio & Driffield, Nigel & Pal, Sarmistha & Roland, Isabelle, 2009. "Excess Leverage and Productivity Growth in Emerging Economies: Is There A Threshold Effect?," CEPR Discussion Papers 7617, C.E.P.R. Discussion Papers.
  7. Nobuhiro Kiyotaki & John Moore, 1995. "Credit Cycles," NBER Working Papers 5083, National Bureau of Economic Research, Inc.
  8. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-70, May.
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  10. Nigel Driffield & Vidya Mahambare & Sarmistha Pal, 2005. "How Ownership Structure Affects Capital Structure and Firm Performance? Recent Evidence from East Asia," Finance 0505010, EconWPA.
  11. Ilya A. Strebulaev, 2004. "Do Tests of Capital Structure Theory Mean What They Say?," Econometric Society 2004 North American Summer Meetings 646, Econometric Society.
  12. Jen Baggs & Eugene Beaulieu & Loretta Fung, 2010. "Are Service Firms Affected By Exchange Rate Movements?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages S156-S176, 06.
  13. Goldstein, Robert & Ju, Nengjiu & Leland, Hayne, 2001. "An EBIT-Based Model of Dynamic Capital Structure," The Journal of Business, University of Chicago Press, vol. 74(4), pages 483-512, October.
  14. Fischer, Edwin O & Heinkel, Robert & Zechner, Josef, 1989. " Dynamic Capital Structure Choice: Theory and Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 19-40, March.
  15. McConnell, John J. & Servaes, Henri, 1995. "Equity ownership and the two faces of debt," Journal of Financial Economics, Elsevier, vol. 39(1), pages 131-157, September.
  16. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
  17. Huynh, Kim P. & Petrunia, Robert J., 2010. "Age effects, leverage and firm growth," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 1003-1013, May.
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Cited by:
  1. Maria Gonzalez, 2012. "Nonfinancial Firms in Latin America," IMF Working Papers 12/279, International Monetary Fund.

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