The Asian Flu and Russian Virus: Firm-Level Evidence on How Crises are Transmitted Internationally
65 Pages Posted: 27 Jul 2000 Last revised: 2 Nov 2022
Date Written: July 2000
Abstract
This paper uses firm-level information to evaluate how crises are transmitted internationally. It constructs a new data set of financial statistics, industry information, geographic data, and stock returns for over 10,000 companies in 46 countries to test what types of firms were most affected by the East Asian and Russian crises. Results suggest that a product-competitiveness and income effect were both important transmission mechanisms during the later part of the Asian crisis and the Russian crisis. For example, if a firm's main product line competed with a major East Asian export, the firm's average daily abnormal stock return was 13 percent lower during the Asian crisis. The magnitude of this product competitiveness effect during the Russian crisis was 32 percent. Results suggest that a credit crunch was not important during either crisis. Finally, country-specific effects, which are poorly explained by macroeconomic and corporate governance variables, can have a larger impact than all other transmission mechanisms combined.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Depreciations
By Mihir A. Desai, C. Fritz Foley, ...
-
Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Crises
By Mihir A. Desai, C. Fritz Foley, ...
-
Investment, Pass-Through and Exchange Rates: A Cross-Country Comparison
-
Cross-Border Trading as a Mechanism for Capital Flight: Adrs and the Argentine Crisis
By Sebastian Auguste, Kathryn M.e. Dominguez, ...
-
Corporate Leverage and Currency Crises
By Arturo Bris and Yrjo Koskinen
-
Cheap Labor Meets Costly Capital: The Impact of Devaluations on Commodity Firms