SMEs get hit harder in a market crisis, say biz profs
Panicking money-men see big firms as safer
SMEs, especially riskier R&D-led ones, get even harder than one would expect by market crises, according to a new analysis by biz professors.
"We found that during big market crashes, investors adjust their holdings towards bigger corporate stocks that they perceive as being safer, even after controlling for economic exposures," says David Berger, finance prof.
Berger and his colleague H J Turtle examined market data covering 20 years and eight large emerging crises. They found that SMEs in one country tended to suffer a market hit following a crisis overseas, even if their own national economy remained unhurt overall.
"Investors see big blue chip stocks as the safer ones, and small, R&D intensive stocks for example, as riskier," Berger said. "So the stock of a smaller domestic company could take a hit because of an international shock."
Berger and Turtle's full study will be published in the Global Finance Journal. It is available online in advance of press here.
“Because investors start dumping smaller stocks in favor of safer, larger ones, the irony is that larger multinational corporations potentially see positive benefits during international crises," comments Berger. ®