Coping with high decline: firms’ resilience to adversity

Abstract

AbstractThis work investigates the factors that precipitate a firm’s sudden high decline, which is defined as a short-term heavy contraction in firm size, and examines firms’ performance in the aftermath of a high-decline (HD) event. The empirical analysis reveals patterns of HD events over the business cycle and across markets, providing insights into the factors that enable firms’ resilience in terms of better growth performance after an HD event. Firms that upgrade their production processes and invest in enhancing their human capital show better growth trajectories in the aftermath of an HD event.