Abstract:-

This study examines the firm-level impacts of two economic crises on Indian manufacturing, viz., the economic crisis generated following the Global Financial Crisis of 2007-08 and the economic crisis generated due to demonetization in November 2016, followed by the emergence of Covid-19 in March 2020. The impacts on the two alternative measures of firm performance, viz., Tobin’s q and ROA are observed to be different. Moreover, the impacts are quite different in the two crisis periods, for both Tobin’s q and ROA. We observe that capital intensity, competition, leverage, and firm size are highly significant determinants of firm survival and recovery. Capital-intensive firms experience less contraction during Crisis 1 for Tobin’s q. Firms with high pre-crisis capital intensity experienced smaller drops in firm performance. However, we get the opposite result for Tobin’s q during Crisis 2. But for ROA again capital intensity has a negative significant effect during Crisis 1. More competition among firms helps tSyverson, 2020). Ownership patterns of firms did not play any role in experiencing the effects of the crisis. Moreover, unlike earlier studies, export orientation and firm age played no role in this context in India. Thus, a unique targeted public policy will not help firm survival during an economic crisis.

(Jointly with Mekhla Bhowmick, Calcutta University)