What are determinants of good performance during the financial crisis: Evidence from Sweden

Abstract: The financial crisis started in 2007 caused a global recession. Firms have been facing an extremely difficult time since then. A lot of them experienced a severe drop and fluctuation of profitability. Even so some firms still performed well during the hard time. In this study we are searching for the determinants of comparatively good performance (including both profitability and profit stability) for firms. With an empirical study on Swedish firms, we explored the relationship between several firm variables and firms' performance during the crisis. The result showed that some variables indeed has an impact on performance, among which industry effect was the most influential variable, while diversification strategy also has a positive impact on performance. We stress the benefits of diversification strategy as it is a strategic choice directly made by managers of firms. We suggest that diversification strategy plays an important role in the long-term success of firms, as it has a positive effect on profitability not only when economy is in stable stage, which has been proved by some further literature, but also when the economy is experiencing a recession, which is the result of our study.