Relative Firm Performance and the Financial Crisis of 2008 : an empirical study on how relative firm performance changes over the business cycle, and how relative firm performance is related with the impact of, and responses to, the crisis.
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The purpose of this thesis is to study how recessions affect firm performance within industries, and how firm performance is related to the impact of and responses to the crisis. First, we investigate how recessions affect aggregate performance, stability and the competitive dynamics within industries in the Norwegian economy. This is done by measuring relative firm performance over the business cycle. Second, we examine the relationship between firm performance before, during and after the Financial Crisis, with both the impact of the crisis, and how firms respond to the crisis. Our analysis will be performed using both accounting data on Norwegian firms between 1999 and 2013, and results from a survey conducted by STOP in 2010 amongst Norwegian firms on the Financial Crisis. We also include a brief analysis of the business cycles in the Norwegian economy during the period from 1999 to 2013, using quarterly GDP data from SSB. Our main findings are: i) The impact of the Financial Crisis on the stability of relative performance differed vastly between industries. In some industries the stability of firm performance decreased over the crisis, while in other industries the stability increased. ii) The Financial Crisis seems to have changed the competitive dynamics within some industries. In other industries the competitive dynamics seems to be consistent during and after the Financial Crisis as the period before the crisis. iii) There seems to be no relationship between firm performance before the crisis, and how firms were impacted and responded to the crisis. iv) Low performing firms during and after the crisis were more negatively impacted, and saw measures related to cost-cutting strategies as relatively more important, compared to high performing firms.