U.S. Economic Recession, Changes in Strategic Behaviors, and Performance of Asian Firms

摘要

Faced with external shocks such as significant setbacks in economic system, firms in different regions of the world are forced to react by changing their stance in the set of strategies, inevitably affecting subsequent period firm performance. Perhaps more importantly, firms that are financially constrained may experience a bigger impact of changes in strategy variables on subsequent period firm performance than those that are financially unconstrained; financially constrained firms are more likely to experience a greater decline in performance during a crisis and have more room to improve after the crisis. While many strategy variables can be used to explain firm performance, the strategy variables captured in financial statements are the easiest. This study investigated whether firms in Asia, when faced with the economic shock generated by the U.S. economic recession of 2007-2008, changed their strategy variables and experienced better firm performance due to changes in the postcrisis period. We found that while increase in sales, equity capital, and cash tended to generate better firm performance in the postcrisis period, increase in debt and R&D tended to generate worse firm performance in the postcrisis period. Additional results show that change in the above-noted significant variables' impact on subsequent period firm performance was stronger for financially constrained firms. We interpreted this latter result as indicating that financially unconstrained firms would have more slack resources even in the crisis period and hence the impact of change in strategy variables on firm performance in the postcrisis period would be less for them.