Corporate Flexibility in a Time of Crisis

79 Pages Posted: 4 Feb 2021 Last revised: 15 Mar 2022

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: March 14, 2022

Abstract

We use the COVID shock to study the direct and interactive effects of several forms of corporate flexibility on short- and long-term real business plans. We find that i) workplace flexibility, namely the ability for employees to work remotely, plays a central role in determining firms’ employment plans during the health crisis; ii) investment flexibility allows firms to increase or decrease capital spending based on their business prospects in the crisis, with effects shaped by workplace flexibility; and iii) financial flexibility contributes to stronger employment and investment, in particular when fixed costs are high. While the role of workplace flexibility is new to the COVID crisis, CFOs expect 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 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 (March 14, 2022). 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 )

114 East Avenue
369 Sage Hall
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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United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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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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