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A real options model formalizes this mechanism and empirical analyses grounded in U.S. data from 1961–2020 introduce a firm-level proxy for downscale operating flexibility (FLEX). Results show operating flexibility mitigates stock price crash risk, especially during economic recessions. The effect is strongest for firms with lower productivity or profitability and higher operating leverage, and it intensifies in longer, more severe recessions.",{"@graph":63,"@context":118},[64,80,101],{"@type":65,"itemListElement":66},"BreadcrumbList",[67,71,74,77],{"item":68,"name":69,"@type":70,"position":9},"https://docshare.wps.com","Home","ListItem",{"item":72,"name":10,"@type":70,"position":73},"https://docshare.wps.com/template/",2,{"item":75,"name":11,"@type":70,"position":76},"https://docshare.wps.com/template/presentations/",3,{"item":78,"name":59,"@type":70,"position":79},"https://docshare.wps.com/template/survive-the-economic-downturn-survive-the-economic-downturn-operating-flexibility-productivity-and-stock-crash-operating-flexibility-effect-and-real-options-model/564377/",4,{"url":78,"name":59,"@type":81,"image":82,"author":87,"headline":59,"publisher":90,"fileFormat":93,"inLanguage":57,"description":61,"dateModified":94,"datePublished":95,"encodingFormat":93,"isAccessibleForFree":96,"interactionStatistic":97},"DigitalDocument",{"url":83,"@type":84,"width":85,"height":86},"https://docshare.wps.com/thumbnails/survive-the-economic-downturn-survive-the-economic-downturn-operating-flexibility-productivity-and-stock-crash-operating-flexibility-effect-and-real-options-model/564377.png","ImageObject",442,249,{"name":88,"@type":89},"Rhys","Person",{"url":68,"name":91,"@type":92},"DocShare","Organization","application/pdf","2026-10-22","2026-10-12",true,{"@type":98,"interactionType":99,"userInteractionCount":76},"InteractionCounter",{"@type":100},"ViewAction",{"@type":102,"mainEntity":103},"FAQPage",[104,110,114],{"name":105,"@type":106,"acceptedAnswer":107},"What does operating flexibility do during economic downturns?","Question",{"text":108,"@type":109},"Operating flexibility helps firms reduce operating costs associated with unproductive resources, strengthening resilience in challenging times.","Answer",{"name":111,"@type":106,"acceptedAnswer":112},"How is the research insight formalized?",{"text":113,"@type":109},"The study employs a real options model to formalize how operating flexibility supports resilience and influences outcomes.",{"name":115,"@type":106,"acceptedAnswer":116},"How does operating flexibility affect stock price crash risk?",{"text":117,"@type":109},"Using U.S. data from 1961–2020, the analysis shows operating flexibility mitigates stock price crash risk, with a stronger effect during economic recessions.","https://schema.org",{"og:url":78,"og:type":120,"og:title":59,"og:site_name":91,"og:description":61},"article",{"robots":122,"canonical":78},"index,follow",{"doc_id":124,"site_id":56},564377,1792383848,{"code":4,"msg":5,"data":127},{"doc_id":124,"user_id":128,"nickname":88,"user_avatar":129,"doc_module":9,"category_id":8,"category_name":11,"doc_title":59,"doc_description":61,"doc_content":130,"file_id":131,"file_url":132,"file_type":133,"file_size":134,"view_count":76,"is_deleted":4,"is_public":9,"is_downloadable":9,"audit_status":9,"page_count":135,"language":136,"language_code":57,"site_id":56,"html_lang":57,"table_of_contents":137,"faqs":138,"seo_title":139,"seo_description":61,"update_tm":140,"read_time":15},687207024643,"https://ap-avatar.wpscdn.com/davatar_3d24733baf745e90a7e4bdd5f77d97b2","University of Birmingham  \nSurvive the economic downturn  \nLi, Yang; Wang, Xiaojun; Xu, Fangming; Ho, Tuan  \nDOI:  \n10.1002/joom.1344  \nLicense:  \nCreative Commons: Attribution (CC BY)  \nDocument Version  \nPublisher's PDF, also known as Version of record  \nCitation for published version (Harvard):  \nLi, Y, Wang, X, Xu, F & Ho, T 2025, 'Survive the economic downturn: Operating flexibility, productivity, and stock crash', Journal of Operations Management, vol. 71, no. 4, pp. 483-515. [https://doi.org/10.1002/joom.1344](https://doi.org/10.1002/joom.1344)  \nLink to publication on Research at Birmingham portal  \nGeneral rights  \nUnless a licence is specified above, all rights (including copyright and moral rights) in this document are retained by the authors and/or the copyright holders. The express permission of the copyright holder must be obtained for any use of this material other than for purposes permitted by law.  \n•Users may freely distribute the URL that is used to identify this publication.  \n•Users may download and/or print one copy of the publication from the University of Birmingham research portal for the purpose of private study or non-commercial research.  \n•User may use extracts from the document in line with the concept of ‘fair dealing’ under the Copyright, Designs and Patents Act 1988 (?)  \n•Users may not further distribute the material nor use it for the purposes of commercial gain.  \nWhere a licence is displayed above, please note the terms and conditions of the licence govern your use of this document.  \nWhen citing, please reference the published version.  \nTake down policy  \nWhile the University of Birmingham exercises care and attention in making items available there are rare occasions when an item has been uploaded in error or has been deemed to be commercially or otherwise sensitive.  \nIf you believe that this is the case for this document, [please contact UBIRA@lists.bham.ac.uk](please contact UBIRA@lists.bham.ac.uk) providing details and we will remove access to the work immediately and investigate.  \nDownload date: 12. Oct. 2026  \nReceived: 12 September 2023 Revised: 14 October 2024 Accepted: 8 November 2024  \nDOI: 10.1002/joom.1344  \nRESE ARCH ARTICL E  \nSurvive the economic downturn: Operating flexibility, productivity, and stock crash  \nYang Li 1 | Xiaojun Wang 2  | Fangming Xu 3 | Tuan Ho 3  \n1Queen's Business School, Queen's University Belfast, Belfast, UK 2Birmingham Business School, University of Birmingham, Birmingham, UK 3University of Bristol Business School, University of Bristol, Bristol, UK  \nCorrespondence  \nXiaojun Wang, Birmingham Business School, University of Birmingham, 116 Edgbaston Park Road, B15 2TY, Birmingham, UK. [Email:](Email: x.wang.18@bham.ac.uk)[ x.wang.18@bham.ac.uk](Email: x.wang.18@bham.ac.uk)  \nHandling Editors: Arnd Huchzermeier and Panos Kouvelis  \nAbstract  \nOperating flexibility supports a firm's resilience strategy during challenging times by enabling them to promptly cut down operating costs associated with unproductive resources. We employ a real options model to formalize this insight. Our empirically grounding analytics motivate a firm-level proxy for downscale operating flexibility (FLEX), which effectively captures the adjustment frictions across different contexts of firms' [operations. Using U.S. data](operations. Using U.S. data)[ ](operations. Using U.S. data)between 1961 and 2020, we show that operating flexibility mitigates the risk of stock price crashes, especially during periods of economic recession. Consistent with the loss-curtailment mechanism, the operating flexibility effect is more pronounced for firms with lower productivity/profitability or higher operating leverage and is further amplified during longer and more severe recessions. Managers may avail themselves of our well-tested empirical measure of operating flexibility to guide their efforts in building a more resilient operations structure.  \nKEYWOR DS  \ncrash risk, economic recession","cbCaiq4ITb3b7uyv","https://ap.wps.com/l/cbCaiq4ITb3b7uyv","pdf",2551447,34,"English","# Abstract\n## Research approach and model\n## Empirical proxy for downscale flexibility (FLEX)\n## Findings on crash risk during recessions\n## Mechanism and heterogeneity\n# Highlights\n## Downscale flexibility during recessions\n## Benefits for lower productivity or profitability firms\n## Role of real options in resilience","[{\"question\":\"What does operating flexibility do during economic downturns?\",\"answer\":\"Operating flexibility helps firms reduce operating costs associated with unproductive resources, strengthening resilience in challenging times.\"},{\"question\":\"How is the research insight formalized?\",\"answer\":\"The study employs a real options model to formalize how operating flexibility supports resilience and influences outcomes.\"},{\"question\":\"How does operating flexibility affect stock price crash risk?\",\"answer\":\"Using U.S. data from 1961–2020, the analysis shows operating flexibility mitigates stock price crash risk, with a stronger effect during economic recessions.\"}]","Survive the economic downturn - Survive the economic downturn: Operating flexibility, productivity, and stock crash - Operating flexibility effect and real options model | PDF",1791841839]