Technological shocks, import competition, and shifts in regulatory policies lead with increasing frequency to major industry shakeouts and radical change in economic environments. Whether firms succumb or thrive depends on the extent to which they restructure and reinvent their business models. Therefore, it is crucial to understand which factors help spur prompt and successful restructuring of firms affected by permanent negative shocks and, at the macroeconomic level, of stagnating economies.
Our recent working paper aims to understand how a firm’s ownership structure affects its response to permanent negative shocks. Existing literature implies that in firms with short-horizon investors, management fears … Read more