To Save or to Invest? Strategic Management during the Financial Crisis

We exploit the credit crunch of 2007 to empirically examine how companies adjusted their investments in key strategic resources---i.e., their workforce, capital expenditures, R&D, and corporate social responsibility (CSR)---in response to the financial crisis. In August 2007, the cost of credit sky-rocketed due to the collapse of the asset-backed securities market. We compare companies whose long-term debt matured shortly before and after August 2007 to obtain (quasi-)random variation in the extent to which companies were hit by the financial crisis. We find that companies that were adversely affected followed a "two-pronged" approach of curtailing their workforce and capital expenditures, while maintaining their investments in R&D and CSR. We further document that firms that followed this two-pronged approach performed better once the economy recovered.

Read here an interview Prof. Ioannou gave to Prof. Karl Moore (The Globe and Mail), discussing the findings of this paper.

My Research

I am a strategy scholar whose research focuses on Sustainability and Corporate Social Responsibility (CSR). More specifically, I seek to understand whether, how, and the extent to which the modern business organization contributes towards building a sustainable future. My academic work evolves around two main themes: a) understanding how investment analysts, and the public equity markets, perceive, evaluate and react to corporate engagement with, and integration of, environmental and social issues into strategy and b) understanding the multiple factors (e.g. institutional, regulatory, behavioural) that may affect, drive or hinder, the corporate decision to adopt environmentally and socially responsible strategies.

Upcoming Events

February 27, 2018

Prof. Ioannou will be speaking at LBS HR Strategy Forum

April 27, 2018

Prof. Ioannou will be speaking at ESMT's Sustainable Business RoundTable

May 24, 2018

Prof. Ioannou will be speaking at LBS's Private Equity Symposium