Business in times of crisis

Conservative Financial Reporting and Resilience to the Financial Crisis

Given that the current economic hardship created by COVID-19 is still in progress, it is important to understand firms’ strategic responses to prior external shocks (e.g., the financial crisis in 2007 and 2008) and the relationship between their courses of action and post-shock firm performance. This study examines (1) whether firms’ practices in financial reporting are associated with the financial crisis and (2) whether firms with conservative financial reporting during the crisis exhibit better performance in post-crisis periods. Using the ordinary least squares (OLS) models and conservatism proxy, we find that firms are more conservative in financial reporting during the financial crisis. We also find that firms with a higher degree of accounting conservatism in the financial crisis outperform in the post-crisis periods. These findings have implications for practice by providing guidance on accounting conservatism for firms who want to develop resilience from financial setbacks due to economic shocks.

Family ownership during the Covid-19 pandemic

A growing literature is devoted to understand how companies react to major external shocks. Contributing to this research, we study how the presence of families in corporate ownership and leadership affected the reaction of firms to the Covid-19 pandemic. Using data from Italy, we find that family firms exhibited higher market performance and operating profitability than other firms during the pandemic period. This result is stronger for companies without relevant minority investors and with multiple family shareholders. Delving into the mechanisms, we show that the outperformance of family firms is driven by a more efficient use of labor and a lower drop in revenues. Collectively, our results expand existing research by showing how family ties shape the response to adverse events.

The economics of the COVID-19 pandemic: an assessment

The COVID-19 pandemic has created both a medical crisis and an economic crisis. As others have noted, we face challenges just as big as those in the Spanish Flu Pandemic and the Great Depression—all at once. The tasks facing policy-makers are extraordinary. Many new kinds of intervention are urgently required. This issue of the Oxford Review of Economic Policy has two objectives. The first is to explore these new interventions: evaluating their use, suggesting how they might be improved, and proposing alternatives. The second is to show that the challenges facing us are global and will require international cooperation if they are to be dealt with effectively. This short introductory essay positions the papers in the issue within an overall conceptual framework, with the aim of telling an overarching story about the pandemic.