International Transmission of the 2008-09 Financial Crisis: Evidence from Japan

We investigate the international transmission of the financial crisis in 2008-2009 to Japanese firms by examining both the stock price responses to the crisis events and the changes in operating performance subsequent to the crisis. Both the stock price responses and ex-post operating performance consistently indicate that the crisis hit Japanese firms through the trade and liquidity channels. The quantitative effects of the two channels, however, differ between the two performance measures—the stock market weighed more on the liquidity channel than the trade channel, while ex-post operating performance indicate that the latter played a more important role than the former in transmitting the crisis to Japanese firms.