Research Article
Response Patterns and Firm Performance of Korean Large Corporations during National Economic Crises
Published: January 2013 · Vol. 42 No. 5 · pp. 1495-1522
Full Text
Abstract
This study empirically examines, through time-series data analysis, the corporate-level crisis response patterns exhibited by large Korean corporations in overcoming the 1997 Korean foreign exchange crisis, the small-scale domestic crisis surrounding the 2003 credit card crisis, and the 2008 global financial crisis, as well as the relationship between these patterns and post-crisis corporate performance. The analysis results found that while financial vulnerability is closely associated with corporate survival and performance, it cannot be confirmed whether it is an antecedent causal factor of corporate survival and performance; rather, the possibility was discovered that its impact on corporate performance may be moderated by the firm's strategic behavior during the crisis response process. Additionally, the crisis response patterns exhibited across the three economic crises were found not to be concentrated in a particular response type but rather to appear in a diverse array of types. Finally, a multifaceted analysis of the relationship between crisis response patterns and post-crisis corporate performance revealed that firms that reduced risk based on risk-neutral behavior before and after the crisis showed relatively better performance than those that exhibited extreme strategic switching between risk reduction and risk expansion around the crisis. In contrast, firms that engaged in risk-expanding behavior both before and during the crisis regardless of the crisis, driven by their risk-seeking propensity, showed relatively lower performance. The research findings suggest that to enhance the likelihood of corporate survival and improve performance in the face of a crisis, it is important to take appropriate crisis response actions that reflect the given contextual characteristics and corporate needs, along with managing financial vulnerability.
