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• Article | Brookings Papers on Economic Activity | Fall 2020

  Sizing Up Corporate Restructuring in the COVID Crisis

  Robin Greenwood, Benjamin Iverson and David Thesmar

  In the wake of the COVID-19 pandemic, the financial and legal system will need to deal with a surge of financial distress in the business sector. Some firms will be able to survive, while others will face bankruptcy and thus need to be liquidated or reorganized. Many surviving firms will need to be downsized or acquired. In normal times, this triage is supported by the court system, banks, and financial markets. The goal of this paper is to size up the coming surge of financial distress, list the challenges it presents in the current environment, and offer potential policy solutions. Overall, our analysis suggests that the two key issues will be court congestion and excess liquidation and failure of small firms.

  Keywords: COVID-19; Health Pandemics; Economy; System Shocks; Financial Crisis; Restructuring;

  Citation:

  Greenwood, Robin, Benjamin Iverson, and David Thesmar. "Sizing Up Corporate Restructuring in the COVID Crisis." Brookings Papers on Economic Activity (Fall 2020). (Also NBER Working Paper, No. 28104.)  View Details

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• Working Paper | HBS Working Paper Series | 2020

  Predictable Financial Crises

  Robin Greenwood, Samuel G. Hanson, Andrei Shleifer and Jakob Ahm Sørensen

  Using historical data on post-war financial crises around the world, we show that crises are substantially predictable. The combination of rapid credit and asset price growth over the prior three years, whether in the nonfinancial business or the household sector, is associated with about a 40% probability of entering a financial crisis within the next three years. This compares with a roughly 7% probability in normal times, when neither credit nor asset price growth has been elevated. Our evidence cuts against the view that financial crises are unpredictable “bolts from the sky” and points toward the Kindleberger-Minsky view that crises are the byproduct of predictable, boom-bust credit cycles. The predictability we document favors macro-financial policies that “lean against the wind” of credit market booms.

  Keywords: Financial Crisis; Forecasting and Prediction; Mathematical Methods;

  Citation:

  Greenwood, Robin, Samuel G. Hanson, Andrei Shleifer, and Jakob Ahm Sørensen. "Predictable Financial Crises." Harvard Business School Working Paper, No. 20-130, June 2020.  View Details

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• Case | HBS Case Collection | February 2020

  Highfields Capital and McDonalds

  Mark Egan and Robin Greenwood

  McDonald’s reported its fifth consecutive quarter of declining same-store sales growth in early 2015. Despite McDonald’s recent poor performance, Jonathon S. Jacobson, the founder and Chief Investment Officer of Boston-based Highfields Capital Management, had initiated a large position in McDonald’s stock. Jacobson and his team believed that there was enormous upside in McDonald’s stock if management successfully implemented what they perceived to be straightforward operational and financial changes. McDonald’s needed to return to its core competencies of producing quick and reliable burgers and fries. In addition, they believed that financial restructuring could unlock sizable value for investors. Jacobson and his team debated whether to more forcefully articulate their vision for the company and began drafting a letter to Andrew McKenna, McDonald’s Chairman.

  Keywords: McDonald's; Stocks; Performance Improvement; Operations; Finance; Restructuring; Value Creation; Financial Services Industry;

  Citation:

  Egan, Mark, and Robin Greenwood. "Highfields Capital and McDonalds." Harvard Business School Case 220-061, February 2020.  View Details

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