title: To Invest or Not to Invest, That Is the Question: Analysis of Firm Behavior under Anticipated Shocks.
abstract: When companies are faced with an upcoming and expected economic shock some of them tend to react better than others. They adapt by initiating investments thus successfully weathering the storm, while others, even though they possess the same information set, fail to adopt the same business strategy and eventually succumb to the crisis. We use a unique setting of the recent financial crisis in Croatia as an exogenous shock that hit the country with a time lag, allowing the domestic firms to adapt. We perform a survival analysis on the entire population of 144,000 firms in Croatia during the period from 2003 to 2015, and test whether investment prior to the anticipated shock makes firms more likely to survive the recession. We find that small and micro firms, which decided to invest, had between 60 and 70% higher survival rates than similar firms that chose not to invest. This claim is supported by both non-parametric and parametric tests in the survival analysis. From a normative perspective this finding could be important in mitigating the negative effects on aggregate demand during strong recessionary periods.
authors: CERGE-EI, A joint workplace of the Center for Economic Research and Graduate Education, Charles University, Prague, and the Economics Institute of the Academy of Sciences of the Czech Republic, Prague, Czech Republic.|Luxembourg School of Business, Luxembourg, Grand-Duchy of Luxembourg.|Department of Economics, Zagreb School of Economics and Management, Zagreb, Croatia.|Adriatic Economic Association, Zagreb, Croatia.
authors: Dejan
authors: D
authors: Kovac
authors: Luxembourg School of Business, Luxembourg, Grand-Duchy of Luxembourg.|Department of Economics, Zagreb School of Economics and Management, Zagreb, Croatia.|Adriatic Economic Association, Zagreb, Croatia.
authors: Vuk
authors: V
authors: Vukovic
authors: Adriatic Economic Association, Zagreb, Croatia.|Zenlab d.o.o., Zagreb, Croatia.
authors: Nikola
authors: N
authors: Kleut
authors: Luxembourg School of Business, Luxembourg, Grand-Duchy of Luxembourg.|Department of Economics, Zagreb School of Economics and Management, Zagreb, Croatia.|Adriatic Economic Association, Zagreb, Croatia.|Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia.|Faculty of Civil Engineering, University of Rijeka, Rijeka, Croatia.
authors: Boris
authors: B
authors: Podobnik
mesh_terms: D017523:Croatia; D016208:Databases, Factual; D003657:Decision Making; D057172:Economic Recession / Q000706:statistics & numerical data*; D007221:Industry / Q000706:statistics & numerical data*; D007449:Investments / Q000191:economics* / Q000706:statistics & numerical data*; D018803:Models, Economic; D016016:Proportional Hazards Models