IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_12098.html

Young Firms Under Pressure: Heterogeneous Investment Responses to a Trade Shock

Author

Listed:
  • Andreas Dibiasi
  • Katharina Erhardt

Abstract

This paper studies heterogeneous firm responses to a sudden trade-induced profitability shock -- the 2015 Swiss franc appreciation. Using firm-level investment data and a novel measure of exposure, we document that this trade shock causes large and persistent investment declines among affected firms. Examining heterogeneous responses among firms with similar exposure, we find that differences in responsiveness are not explained by economic fundamentals but are strongly linked to firm age and managerial experience. Younger firms and those led by less experienced managers react substantially more strongly. We argue that these empirical patterns are consistent with a model of Bayesian learning, in which firms update their beliefs about profitability over time. The results provide important insights into the long-lasting effects of trade shocks on business dynamism, capital investment, and local employment.

Suggested Citation

  • Andreas Dibiasi & Katharina Erhardt, 2025. "Young Firms Under Pressure: Heterogeneous Investment Responses to a Trade Shock," CESifo Working Paper Series 12098, CESifo.
    • Handle: RePEc:ces:ceswps:_12098
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp12098.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andreas Dibiasi & Heiner Mikosch & Samad Sarferaz, 2025. "Uncertainty Shocks, Adjustment Costs, and Firm Beliefs: Evidence from a Representative Survey," American Economic Journal: Macroeconomics, American Economic Association, vol. 17(3), pages 36-73, July.
    2. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    3. Binding, Garret & Dibiasi, Andreas, 2017. "Exchange rate uncertainty and firm investment plans evidence from Swiss survey data," Journal of Macroeconomics, Elsevier, vol. 51(C), pages 1-27.
    4. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1351-1408.
    5. Ryan A. Decker & John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2016. "Declining Business Dynamism: What We Know and the Way Forward," American Economic Review, American Economic Association, vol. 106(5), pages 203-207, May.
    6. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1169-1208.
    7. Dibiasi, Andreas & Abberger, Klaus & Siegenthaler, Michael & Sturm, Jan-Egbert, 2018. "The effects of policy uncertainty on investment: Evidence from the unexpected acceptance of a far-reaching referendum in Switzerland," European Economic Review, Elsevier, vol. 104(C), pages 38-67.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. KUMANOMIDO, Hiroshi, 2026. "Exchange Rate Appreciation and Structural Adjustment : Evidence from the Plaza Accord," TDB-CAREE Discussion Paper Series E-2025-04, Teikoku Databank Center for Advanced Empirical Research on Enterprise and Economy, Graduate School of Economics, Hitotsubashi University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Botsch, Matthew & Vanasco, Victoria, 2019. "Learning by lending," Journal of Financial Intermediation, Elsevier, vol. 37(C), pages 1-14.
    2. Nguyen, Minh Hong & Trinh, Vu Quang, 2023. "U.K. economic policy uncertainty and innovation activities: A firm-level analysis," Journal of Economics and Business, Elsevier, vol. 123(C).
    3. Dibiasi, Andreas & Erhardt, Katharina, 2025. "Young firms under pressure: Heterogeneous investment responses to a trade shock," DICE Discussion Papers 426, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Rahaman, Mohammad M. & Zaman, Ashraf Al, 2013. "Management quality and the cost of debt: Does management matter to lenders?," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 854-874.
    5. Mario Daniele Amore & Orsola Garofalo & Alessandro Minichilli, 2014. "Gender Interactions Within the Family Firm," Management Science, INFORMS, vol. 60(5), pages 1083-1097, May.
    6. Kahsay, Goytom Abraha & Medhin, Haileselassie, 2020. "Leader turnover and forest management outcomes: Micro-level evidence from Ethiopia," World Development, Elsevier, vol. 127(C).
    7. Nicholas Bloom & Renata Lemos & Raffaella Sadun & John Van Reenen, 2020. "Healthy Business? Managerial Education and Management in Health Care," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 506-517, July.
    8. Mario BENASSI & Matteo LANDONI & Francesco RENTOCCHINI, 2017. "University Management Practices and Academic Spin-offs," Departmental Working Papers 2017-11, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    9. Najah Attig & Sean Cleary, 2014. "Organizational Capital and Investment-Cash Flow Sensitivity: The Effect of Management Quality Practices," Financial Management, Financial Management Association International, vol. 43(3), pages 473-504, September.
    10. Becker, Sascha O. & Hvide, Hans K., "undated". "Do entrepreneurs matter?," Economic Research Papers 270547, University of Warwick - Department of Economics.
    11. Mano, Yukichi & Akoten, John & Yoshino, Yutaka & Sonobe, Tetsushi, 2014. "Teaching KAIZEN to small business owners: An experiment in a metalworking cluster in Nairobi," Journal of the Japanese and International Economies, Elsevier, vol. 33(C), pages 25-42.
    12. Luca Flabbi & Mario Macis & Andrea Moro & Fabiano Schivardi, 2019. "Do Female Executives Make a Difference? The Impact of Female Leadership on Gender Gaps and Firm Performance," The Economic Journal, Royal Economic Society, vol. 129(622), pages 2390-2423.
    13. Mu-Jeung Yang & Michael Christensen & Nicholas Bloom & Raffaella Sadun & Jan Rivkin, 2026. "How Do Chief Executive Officers Make Strategy?," Management Science, INFORMS, vol. 72(6), pages 4569-4596, June.
    14. José Fillat & Stefania Garetto, 2021. "On the Origins of the Multinational Premium," Working Papers 21-20, Federal Reserve Bank of Boston.
    15. Alona Bilokha & Sudip Gupta, 2024. "Shareholder litigation rights and firm productivity," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 33(2), pages 65-90, May.
    16. Jialong Wang & Ran Cui, 2023. "Does CEO's foreign experience promote export performance? Evidence from China," Asian Economic Journal, East Asian Economic Association, vol. 37(3), pages 326-345, September.
    17. Maue, Casey & Burke, Marshall & Emerick, Kyle, 2020. "Productivity dispersion and persistence among the world’s most numerous firms," CEPR Discussion Papers 14553, Centre for Economic Policy Research.
    18. Coraggio, Luca & Pagano, Marco & Scognamiglio, Annalisa & Tåg, Joacim, 2025. "JAQ of all trades: Job mismatch, firm productivity and managerial quality," Journal of Financial Economics, Elsevier, vol. 164(C).
    19. Stefan Bender & Nicholas Bloom & David Card & John Van Reenen & Stefanie Wolter, 2018. "Management Practices, Workforce Selection, and Productivity," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 371-409.
    20. Irina Levina, 2016. "By connection or by competition? Decentralization of decision-making and hiring strategies at Russian firms," Applied Econometrics, Russian Academy of National Economy and Public Administration (RANEPA), vol. 43, pages 73-95.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_12098. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.