Young Firms under Pressure: Heterogeneous Investment Responses to a Trade Shock

Abstract

This paper studies heterogeneous firm responses to the sudden profitability shock from the 2015 Swiss franc appreciation. Using firm-level investment data, we show that affected firms experience large and persistent investment declines. Among equally exposed firms, heterogeneity is not explained by fundamentals but is strongly linked to firm age and managerial experience: younger firms and those led by less experienced managers react much more strongly.