Does Executives’ and Directors’ Prior Crisis Experience Help Firms Navigate Another Crisis?

We study whether a firm’s executives and directors with experience of leading a firm during the global financial crisis (GFC) helped the firm better respond to the COVID-19 crisis. We argue that executives and directors with GFC experience understood better than others the potential risks associated with a crisis and, therefore, responded more effectively when the crisis was accentuated. Consistent with this prediction, we find that the number of GFC-experienced executives and directors is positively associated with firm performance during the COVID-19 crisis in 2020, while the variable did not affect performance before the crisis. This finding is robust to different model specifications, controlling for endogeneity and using alternative proxies for crisis experience and firm performance. We further observe that firms led by GFC-experienced executives and directors follow relatively conservative business strategies in the pre-COVID period, resulting in greater resilience during the pandemic. The positive effect of GFC-experienced corporate leadership on crisis-period performance is more pronounced for (i) firms belonging to industries badly hit by the COVID crisis, and (ii) relatively poor performing firms during the GFC. Our main result cannot be explained by the effects of unobservable corporate culture, self-selection bias, and executives’ and directors’ managerial skills developed with their age