How the Nature of Exogenous Shocks and Crises Impact Company Performance?: The Effects of Industry Characteristics

Ji Li, Wei Sun, Wanxing Jiang, He Yang and Ludan Zhang
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Ji Li: Department of Management, Hong Kong Baptist University, Kowloon Tong, Hong Kong
Wei Sun: Inner Mongolia University of Finance and Economics, Hohhot, China
Wanxing Jiang: Hong Kong Baptist University, Kowloon Tong, Hong Kong
He Yang: Hong Kong Baptist University, Kowloon Tong, Hong Kong
Ludan Zhang: The University of Hong Kong, Pok Fu Lam, Hong Kong

International Journal of Risk and Contingency Management (IJRCM), 2017, vol. 6, issue 4, 40-55

Abstract: The authors develop an empirical study based on Event System Theory (Morgeson, Mitchell & Liu, 2015), which allows a clearer consideration of specific nature of each exogenous shock and crisis, such as its criticality and geographical proximity. More importantly, they highlight the importance of considering industry characteristics when studying how exogenous shocks and crises may impact both accounting and stock-market performances of companies. Finally, when testing the impacts of economic or political shocks respectively, the authors also take into account the effect of company resources. After analyzing data from companies listed in the New York Stock Exchange, they gain interesting insights: (1) Exogenous shocks and crises with high event criticality are more likely to impact company performance. (2) Exogenous shocks and crises with high event proximity are more likely to impact company performance. (3) Exogenous shocks and crises impact in different directions on a company's accounting performance and stock market performance. Finally, (4) Exogenous shocks and crises make salient the relationship between a firm's resources and its performance, while the relationship is contingent on industry characteristics (i.e., industrial-regulative mechanisms).

Date: 2017
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