Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/219122 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8304
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
This paper studies the determinants of firms’ business outlook and managerial mitigation strategies in the wake of the COVID-19 crisis using a representative panel of German firms. We first demonstrate that the crisis amplifies pre-crisis weaknesses: Firms that appear relatively weak before the crisis are harder hit initially, and, on top of the initial impact, expect more difficulties for their businesses going forward. Consequently, such firms are first to cut employment and investment. Second, our results highlight that expectations regarding the duration of the shutdown—which, at this point of the crisis, exhibit plausibly random variation—are an important determinant of the chosen mitigation strategies: Firms that expect the shutdown to last longer are more likely to lay off workers and to cancel or postpone investment projects.
Subjects: 
expectations
firm behaviour
COVID-19
shutdown
employment
investment
JEL: 
D22
D84
E23
Document Type: 
Working Paper
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