The Even Darker Side of Corporate "Survival Mode"

Duke University's Laura Brinn cautions that all the panicking that seems to be going on inside American corporations in response to the financial crisis—"canceling investments, scaling back projects, drawing on lines of credit and selling assets"—will dim long-term economic prospects. This is according to new research from Duke University’s Fuqua School of Business and the University of Illinois at Urbana-Champaign which examines the difference between what companies say they do and what they actually do.


The researchers surveyed the chief financial officers of 1,275 firms in the U.S., Europe and Asia regarding their outlooks for their companies and the economy in general, according to the Duke News Office. "Of 569 U.S. firms surveyed, 59 percent said that they were directly affected by credit constraints." The consequence is that new projects are not getting launched. And as Professor Harvey gravely points out, "If these projects were completed in years to come, they would generate profits and additional employment opportunities. But, sadly, this is a future these projects will never see. This is a less well-known consequence of the credit crisis.”

The full video version of the research is available for download here. Professors Campello, Graham, and Harvey’s full paper “The Real Effects of Financial Constraints: Evidence from a Financial Crisis,” is available via SSRN here.

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Credit: EAST Team
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Flickr user Tommy Truong79
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