Corporate Flexibility in a Time of Crisis

Abstract

We use timely surveys of US CFOs to study how flexibility shapes companies’ responses to the onset of the COVID-19 crisis and drives longer-term changes in the corporate sector. The three dimensions of corporate flexibility that we study perform distinct functions, yet complement each other. We find that workplace flexibility, namely the ability for employees to work remotely, plays a central role in modulating firms’ employment and investment planning during the crisis. Investment flexibility allows firms to increase or decrease capital spending plans based on their business condition during the crisis, which is shaped by workforce flexibility. Finally, financial flexibility contributes to stronger employment and investment plans. We show that the role played by workplace flexibility is new and was absent during the 2008 financial crisis. CFOs expect the workplace transformation of 2020 to have lasting effects for years to come: high workplace flexibility firms foresee continuation of remote work, stronger employment recovery, and shifting away from traditional capital investment, whereas low workplace flexibility firms will rely more on automation to replace labor.