Corporate Flexibility in a Time of Crisis

59 Pages Posted: 4 Feb 2021

See all articles by John W. Barry

John W. Barry

Duke University

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Yueran Ma

University of Chicago - Booth School of Business

Date Written: February 3, 2021

Abstract

We use timely surveys of US CFOs to study how flexibility shapes companies’ responses to the onset of the COVID-19 crisis and drives longer-term changes in the corporate sector. The three dimensions of corporate flexibility that we study perform distinct functions, yet complement each other. We find that workplace flexibility, namely the ability for employees to work remotely, plays a central role in modulating firms’ employment and investment planning during the crisis. Investment flexibility allows firms to increase or decrease capital spending plans based on their business condition during the crisis, which is shaped by workforce flexibility. Finally, financial flexibility contributes to stronger employment and investment plans. We show that the role played by workplace flexibility is new and was absent during the 2008 financial crisis. CFOs expect the workplace transformation of 2020 to have lasting effects for years to come: high workplace flexibility firms foresee continuation of remote work, stronger employment recovery, and shifting away from traditional capital investment, whereas low workplace flexibility firms will rely more on automation to replace labor.

Keywords: corporate planning; corporate flexibility; corporate decision-making; COVID-19; automation; work from home; remote work; pandemic; crisis; investment; employment

JEL Classification: G01, G30, G32, D22, D23, E22, M12, O16

Suggested Citation

Barry, John W. and Campello, Murillo and Graham, John Robert and Ma, Yueran, Corporate Flexibility in a Time of Crisis (February 3, 2021). Available at SSRN: https://ssrn.com/abstract=3778789 or http://dx.doi.org/10.2139/ssrn.3778789

John W. Barry

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
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Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

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Ithaca, NY 14853
United States

HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile.aspx?id=mnc35

National Bureau of Economic Research (NBER) ( email )

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John Robert Graham (Contact Author)

Duke University ( email )

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919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

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Yueran Ma

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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