We study how firms respond to an unexpected demand shock, exploiting the 2006 boycott of Danish products after publication of Muhammad caricatures. On average, affected firms lose the majority of their exports to Muslim countries and experience a significant decrease in total sales. However, firms with low financial leverage redirect sales to new and existing product-destination markets in non-Muslim countries, which allows them to fully offset their losses. In contrast, high-leverage firms do not enter new markets and instead actively downsize. Our results highlight the importance of financial flexibility in times of crisis, consistent with declarations of practitioners.(c) 2023 Elsevier B.V. All rights reserved.
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Boston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA
NBER, Cambridge, MA 02138 USABoston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA
Gilchrist, Simon
Schoenle, Raphael
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Brandeis Univ, Dept Econ, 415 South St, Waltham, MA 02454 USA
Brandeis Univ, Int Business Sch, 415 South St, Waltham, MA 02454 USABoston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA
Schoenle, Raphael
Sim, Jae
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Fed Reserve Board, Div Res & Stat, 20th St & Constitut Ave NW, Washington, DC 20551 USABoston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA
Sim, Jae
Zakrajsek, Egon
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Fed Reserve Board, Div Monetary Affairs, 20th St & Constitut Ave NW, Washington, DC 20551 USABoston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA
机构:
Boston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA
NBER, Cambridge, MA 02138 USABoston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA
Gilchrist, Simon
Schoenle, Raphael
论文数: 0引用数: 0
h-index: 0
机构:
Brandeis Univ, Dept Econ, 415 South St, Waltham, MA 02454 USA
Brandeis Univ, Int Business Sch, 415 South St, Waltham, MA 02454 USABoston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA
Schoenle, Raphael
Sim, Jae
论文数: 0引用数: 0
h-index: 0
机构:
Fed Reserve Board, Div Res & Stat, 20th St & Constitut Ave NW, Washington, DC 20551 USABoston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA
Sim, Jae
Zakrajsek, Egon
论文数: 0引用数: 0
h-index: 0
机构:
Fed Reserve Board, Div Monetary Affairs, 20th St & Constitut Ave NW, Washington, DC 20551 USABoston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA