global business outlook
DESCRIPTION
Global Business Outlook. A joint survey effort between Duke University and CFO magazine. John R. Graham D. Richard Mead Jr. Family Professor of Finance Director, Global Business Outlook Survey. Global Business Outlook. Quarterly Survey Since July 1996 (55 quarters) - PowerPoint PPT PresentationTRANSCRIPT
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Global Business OutlookA joint survey effort between
Duke Universityand
CFO magazine
1Global Business Outlook Duke University Winter 2009
John R. GrahamD. Richard Mead Jr. Family Professor of Finance
Director, Global Business Outlook Survey
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Global Business Outlook
• Quarterly Survey– Since July 1996 (55 quarters)
• Send to CFO subscribers and ‘Friends of Duke’– Title of CFO, Treasurer, VP Finance
• Global: US, Europe, Asia, China• 1000+ responses• Present results quarterly
– Frequent press coverage– MSNBC, WSJ, FT, BW, Wash Post, NPR, podcast, etc.
Global Business Outlook Duke University Winter 2009 2
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Content
• Ask questions about
• Economic Outlook– Similar questions every quarter
• Topical issues– Effects of credit crisis, gov’t intervention in
financial markets, cost of fuel, etc.
Global Business Outlook Duke University Winter 2009 3
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Global Business Outlook Duke University Winter 2009 4
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Global Business Outlook Duke University Winter 2009 5
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Global Business Outlook Duke University Winter 2009 6
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Global Business Outlook Duke University Winter 2009 7
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Global Business Outlook Duke University Winter 2009 8
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Global Business Outlook Duke University Winter 2009 9
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Global Business Outlook Duke University Winter 2009 10
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Top CFO Concerns (December 2009)
External:• Consumer Demand• Federal Government
Agenda/Policies• Price Pressure• Credit Markets/Interest
Rates
Internal: • Margin Maintenance• Ability to Forecast
Results• Maintaining Morale /
Productivity • Working Capital
Management
Global Business Outlook Duke University Winter 2009 11
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Global Business Outlook Duke University Winter 2009 12
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Global Business Outlook Duke University Winter 2009 13
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Global Business Outlook Duke University Winter 2009 14
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Global Business Outlook Duke University Winter 2009 15
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Global Business Outlook Duke University Winter 2009 16
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Global Business Outlook Duke University Winter 2009 17
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Global Business Outlook Duke University Winter 2009 18
Tech SectorUSA
EuropeAsia
China
-20%-15%-10%
-5%0%5%
10%15%20%25%
08Q4 09Q1 09Q2 09Q3 2009Q4
-0.8%8.0%
9.5%24.3%
6.7%
Earnings Growth
Expected percentage change in earnings over next 12 monthsSource: Duke University / CFO Magazine Global Business Outlook
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Global Business Outlook Duke University Winter 2009 19
Tech SectorUSA
EuropeAsia
China
-10%
-5%
0%
5%
08Q4 09Q1 09Q2 09Q3 2009Q4
2.7%-1.4%
-2.6%
4.9%4.5%
Domestic Employment
Expected percentage change in domestic employment over next 12 monthsSource: Duke University / CFO Magazine Global Business Outlook
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Global Business Outlook Duke University Winter 2009 20
Tech SectorUSA
EuropeAsia
China
-10%
-5%
0%
5%
10%
08Q4 09Q1 09Q2 09Q3 2009Q4
-7.4%
2.6%-0.5%
7.5%2.0%
Outsourced Employment
Expected percentage change in outsourced employment over next 12 monthsSource: Duke University / CFO Magazine Global Business Outlook
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Global Business Outlook Duke University Winter 2009 21
Tech SectorUSA
EuropeAsia
China
-5%
0%
5%
10%
08Q4 09Q1 09Q2 09Q3 2009Q4
5.1%0.3%
-0.2%
2.6%0.9%
Prices
Expected percentage change in prices of own firm’s products over next 12 monthsSource: Duke University / CFO Magazine Global Business Outlook
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Global Business Outlook Duke University Winter 2009 22
Tech SectorUSA
EuropeAsia
China
-5%
0%
5%
10%
08Q4 09Q1 09Q2 09Q3 2009Q4
3.0%1.9%
1.0%
6.4%7.2%
Wages & Salaries
Expected percentage change in wages & salaries over next 12 monthsSource: Duke University / CFO Magazine Global Business Outlook
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Global Business Outlook Duke University Winter 2009 23
Tech SectorUSA
EuropeAsia
China
0%
5%
10%
15%
08Q4 09Q1 09Q2 09Q3 2009Q4
10.1%6.8%
1.4%5.5%
3.0%
Health Care Costs
Expected percentage change in health care costs over next 12 monthsSource: Duke University / CFO Magazine Global Business Outlook
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Global Business Outlook Duke University Winter 2009 24
Tech SectorUSA
EuropeAsia
China
-20%-15%-10%
-5%0%5%
10%15%20%
08Q4 09Q1 09Q2 09Q3 2009Q4
-1.0%1.5%
-3.7%16.0%
7.8%
Capital Spending
Expected percentage change in capital spending over next 12 monthsSource: Duke University / CFO Magazine Global Business Outlook
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Global Business Outlook Duke University Winter 2009 26
USA
Europe
Asia
China
-10%
-5%
0%
5%
10%
08Q4 09Q1 09Q2 09Q3 2009Q4
0.1%-2.8%
8.0%8.1%
IT Spending
Expected percentage change in capital spending over next 12 monthsSource: Duke University / CFO Magazine Global Business Outlook
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Global Business Outlook Duke University Winter 2009 27
CFO Optimism about owncountry’s economy, on ascale of 0 to 100
For U.S. firms,CFO Optimism about ownfirm’s financial prospectsalso shown (in green)
Source: www.cfosurvey.org
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Can CFOs Predict the Future?
1) CFOs predict the future reasonably well
• CFO optimism about own firm is highly correlated with future national numbers for
– Earnings (43% correlation with next year’s earnings)– Employment (81%) – see chart– GDP (78%)
Global Business Outlook Duke University Winter 2009 28
Source: www.cfosurvey.org
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Why care what CFOs say?
2) CFOs say it first
• Correlation with future quarter’s value for– CEO optimism (84%, 1 qtr ahead) – see chart– ISM (75%, 1)– Conf Board consumer confidence (86%, 2)– Michigan consumer confidence (81%, 1)– UBS/Gallup Investor confidence (49%, 2)
Global Business Outlook Duke University Winter 2009 29
Source: www.cfosurvey.org
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Global Business Outlook Duke University Winter 2009 30
Plan to acquire entire firm or part of firm in next 12 months (top 4 US industries)
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Global Business Outlook Duke University Winter 2009 31
Percentage of respondents whose firm has been directly adversely affected by the credit market conditionsSource: Duke University / CFO Magazine Global Business Outlook
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Global Business Outlook Duke University Winter 2009 32
Has your company been directly affected by credit crisis? %yes US firms, by credit rating
Source: www.cfosurvey.org
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Global Business Outlook Duke University Winter 2009 33
Among companies affected by credit crisis … how has your company been affected?
Source: www.cfosurvey.org
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Global Business Outlook Duke University Winter 2009 34
Figure 2/3 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis”
Actions taken in response to credit crisis
-22.0
-9.1
-32.4
-10.9-15.0 -14.2
-9.0
-0.6-4.5
-2.7 -2.7 -2.9
-40
-30
-20
-10
010
% C
hange in P
olicy
Vari
able
Constrained Unconstrained
Policies of Constrained vs. Unconstrained FirmsPanel B - Two Constraint Categories
R&D Expenditures Capital ExpendituresMarketing Expenditures Number of EmployeesCash Holdings Dividend Payments
-4.9-10.1 -11.4
-7.8-3.5
-57.5
-3.7
-11.2-7.1
1.0
-2.0-6.0
-60
-40
-20
0
% C
han
ge
in P
olicy
Var
iable
Constrained Unconstrained
Policies of Constrained vs. Unconstrained FirmsPanel A - Europe
R&D Expenditures Capital ExpendituresMarketing Expenditures Number of EmployeesCash Holdings Dividend Payments
-3.5-6.9
-5.0
5.6
-9.9-11.6
5.6 4.5 4.7 5.72.6
-6.4
-40
-30
-20
-10
010
% C
han
ge
in P
olicy
Var
iable
Constrained Unconstrained
Policies of Constrained vs. Unconstrained FirmsPanel B - Asia
R&D Expenditures Capital ExpendituresMarketing Expenditures Number of EmployeesCash Holdings Dividend Payments
Firms subject to financial constraints plan to cut R&D, capital spending, etc. more than deeply than plans for unconstrained firms
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Global Business Outlook Duke University Winter 2009 35
Cash holdings and cash burn rate during crisis
15.1
11.7
14.6 14.8
010
20
30
Cash
as
% o
f Fir
m T
ota
l A
sset
s
Constrained Unconstrained
Cash Savings of Constrained vs. Unconstrained FirmsPanel D - U.S.
Cash Holdings 1-Year Ago Cash Holdings Today
8.36.4
13.6 13.5
010
2030
Cas
h a
s %
of Fir
m T
ota
l A
sset
s
Constrained Unconstrained
Cash Savings of Constrained vs. Unconstrained FirmsPanel E - Europe
Cash Holdings 1-Year Ago Cash Holdings Today
17.515.6
27.626.1
010
2030
Cas
h a
s %
of Fir
m T
otal
Ass
ets
Constrained Unconstrained
Cash Savings of Constrained vs. Unconstrained FirmsPanel F - Asia
Cash Holdings 1-Year Ago Cash Holdings Today
15.1
11.7
14.6 14.8
010
20
30
Cash
as
% o
f Fir
m T
ota
l A
sset
s
Constrained Unconstrained
Cash Savings of Constrained vs. Unconstrained FirmsPanel D - U.S.
Cash Holdings 1-Year Ago Cash Holdings Today
8.36.4
13.6 13.5
010
2030
Cas
h a
s %
of Fir
m T
ota
l A
sset
s
Constrained Unconstrained
Cash Savings of Constrained vs. Unconstrained FirmsPanel E - Europe
Cash Holdings 1-Year Ago Cash Holdings Today
17.515.6
27.626.1
010
2030
Cas
h a
s %
of Fir
m T
otal
Ass
ets
Constrained Unconstrained
Cash Savings of Constrained vs. Unconstrained FirmsPanel F - Asia
Cash Holdings 1-Year Ago Cash Holdings Today
Figure 4 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis”
Unconstrained firms maintained cash balances during 2008. Financially constrained firms cash on balance sheet fell by 1/5 (from 15.1% of assets to 11.7%)
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Global Business Outlook Duke University Winter 2009 37
0.500.55
0.130.17
0.28
0.42
0.07 0.060
.2.4
.6
Pro
port
ion o
f Fir
ms
Report
ing C
hoic
e
Constrained Unconstrained
Drawing Funds from LCs: Constrained vs. Unconstrained FirmsPanel D - U.S.
Liquidity Needs Daily OperationsPrecautionary Savings Strategic Timing
0.38
0.62
0.04
0.15
0.23
0.38
0.07 0.06
0.2
.4.6
Pro
port
ion o
f Fir
ms
Rep
ort
ing C
hoic
e
Constrained Unconstrained
Drawing Funds from LCs: Constrained vs. Unconstrained FirmsPanel E - Europe
Liquidity Needs Daily OperationsPrecautionary Savings Strategic Timing
0.46
0.59
0.200.18 0.18
0.27
0.070.05
0.2
.4.6
Pro
port
ion o
f Fir
ms
Rep
ort
ing C
hoic
e
Constrained Unconstrained
Drawing Funds from LCs: Constrained vs. Unconstrained FirmsPanel F - Asia
Liquidity Needs Daily OperationsPrecautionary Savings Strategic Timing
Figure 7 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis”
Line of credit use during crisis
17% of constrained U.S. firms said that they borrowed now from line of credit in case their bank cut off access in the future … a “run” on bank lines of credit.
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Global Business Outlook Duke University Winter 2009 38
To what extent have you drawn down your line of credit (as % of maximum)?
0%
10%
20%
30%
40%
50%
60%
70%
80%
2009Q1 2009Q2 2009Q3 2009Q4
AAA / AA A BBB / BB B or lower
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Global Business Outlook Duke University Winter 2009 40
0.46
0.20
0.2
.4.6
.81
Prop
ortio
n of
Fir
ms R
epor
ting
Effec
ts
Constrained Unconstrained
When Markets Operate Normally: Constrained vs. Unconstrained FirmsPanel D - U.S.
0.44
0.18
0.2
.4.6
.81
Prop
ortio
n of
Fir
ms R
epor
ting
Effec
ts
Constrained Unconstrained
When Markets Operate Normally: Constrained vs. Unconstrained FirmsPanel E - Europe
0.47
0.20
0.2
.4.6
.81
Prop
ortio
n of
Firm
s Rep
ortin
g Eff
ects
Constrained Unconstrained
When Markets Operate Normally: Constrained vs. Unconstrained FirmsPanel F - Asia
Figure 10/11 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis”
0.86
0.44
0.2
.4.6
.81
Prop
ortio
n of
Fir
ms
Rep
ortin
g Eff
ects
Constrained Unconstrained
In a Financial Crisis: Constrained vs. Unconstrained FirmsPanel D - U.S.
0.80
0.36
0.2
.4.6
.81
Prop
ortio
n of
Fir
ms
Rep
ortin
g Eff
ects
Constrained Unconstrained
In a Financial Crisis: Constrained vs. Unconstrained FirmsPanel E - Europe
0.69
0.29
0.2
.4.6
.81
Prop
ortio
n of
Fir
ms R
epor
ting
Effec
ts
Constrained Unconstrained
In a Financial Crisis: Constrained vs. Unconstrained FirmsPanel F - Asia
Credit constrained from pursuing NPV>0 projects
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Global Business Outlook Duke University Winter 2009 42
0.52
0.34
0.13
0.56 0.55
0.46
0.09
0.31
0.2
.4.6
.8
Pro
port
ion o
f Fir
ms
Report
ing C
hoic
e
Constrained Unconstrained
Funding Investment: Constrained vs. Unconstrained FirmsPanel D - U.S.
Inv. Funded by Cash Flow Inv. Funded by Cash HoldingsInv. Funded by Other Inv. Cancelled/ Postponed
0.400.35
0.26
0.41 0.41
0.52
0.180.16
0.2
.4.6
.8
Pro
port
ion o
f Fir
ms
Rep
ort
ing C
hoic
e
Constrained Unconstrained
Funding Investment: Constrained vs. Unconstrained FirmsPanel F - Asia
Inv. Funded by Cash Flow Inv. Funded by Cash HoldingsInv. Funded by Other Inv. Cancelled/ Postponed
0.31
0.12
0.31
0.69
0.39 0.40
0.17
0.33
0.2
.4.6
.8
Pro
port
ion o
f Fir
ms
Rep
ort
ing C
hoic
e
Constrained Unconstrained
Funding Investment: Constrained vs. Unconstrained FirmsPanel E - Europe
Inv. Funded by Cash Flow Inv. Funded by Cash HoldingsInv. Funded by Other Inv. Cancelled/ Postponed
Figure 12 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis”
How fund investment if credit constrained?
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Global Business Outlook Duke University Winter 2009 44
To raise funds during the credit crisis …have you sold assets? % who answered yes
• Source: Campello, Graham, Harvey, “The Real Effects of the Credit Crisis”
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Global Business Outlook Duke University Winter 2009 45
As of December 2009, when do you anticipate domestic employment at your firm to return to year-
end 2007 levels? Cumulative Percent
0%10%20%30%40%50%60%70%80%90%
100%
Already at or Exceeding
2007 Levels
In 6 months In one year In two years In three years In four years In 5+ years Possibly Never
US
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Global Business Outlook Duke University Winter 2009 46
As of December 2009, when do you anticipate domestic employment at your firm to return to year-
end 2007 levels? Cumulative Percent
0%10%20%30%40%50%60%70%80%90%
100%
Already at or Exceeding 2007 Levels
In 6 months In one year In two years In three years
In four years In 5+ years Possibly Never
Tech Sector
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Global Business Outlook Duke University Winter 2009 47
As of December 2009, when do you anticipate domestic employment at your firm to return to year-
end 2007 levels? Cumulative Percent
0%
20%
40%
60%
80%
100%
Already at or
Exceeding 2007 Levels
In 6 months In one year In two years In three years
In four years In 5+ years Possibly Never
Manu Sector
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Global Business Outlook Duke University Winter 2009 48
As of September 2009, compared to current sales revenue, how much will your company’s revenue need
to increase for you to increase domestic employment to year-end 2007 levels?
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Global Business Outlook Duke University Winter 2009 49
Reason(s) your company would not benefit from the adoption of a national healthcare system
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Credit Line Terms – Q2 2008 vs. Q2 2009
12.7
Commit Fee Int RateMarkup
Maturity(months)
26.4
127.5
196.8
30.1 27.
6
U.S.A.
Commit Fee Int RateMarkup
Maturity(months)
Europe
Commit Fee Int RateMarkup
Maturity(months)
Asia
20.8
22.6
87.9
115.5
30.5 26.
9 8.9
12.5
124.5
193.5
27.725.3
Source: www.cfosurvey.org June 2009 survey. SeeCampello, Giambona, Graham, and Harvey, 2009
Basispoints
Basispoints
Months
50Global Business Outlook Duke University Winter 2009
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Interest Rate Markup – Q2 2008 vs. Q2 2009 (US data)
Constrained Unconstrained
Non-Investment Grade Investment Grade Negative Cash Flow Positive Cash Flow
191.4
355.9
105.1
141.3
119.2
189.3
155.0
184.1
117.9
213.1
128.4
191.0
Constrained Credit vs. Unconstrained Credit Firms
Non-Investment Grade vs. Investment Grade Firms
Negative Cash Flow vs. Positive Cash Flow Firms
Source: www.cfosurvey.org June 2009 survey. SeeCampello, Giambona, Graham, and Harvey
Units = basis points
51Global Business Outlook Duke University Winter 2009
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Maturity of new lines – Q2 2008 vs. Q2 2009 (US data)
Constrained Credit Unconstrained Credit
Non-Investment Grade Investment Grade Negative Cash
Flow
Positive Cash
Flow
28.3
22.5
30.729.1
29.125.9
36.6 37.7
23.020.5
31.228.8
Constrained Credit vs. Unconstrained Credit Firms
Non-Investment Grade vs. Investment Grade Firms
Negative Cash Flow vs. Positive Cash Flow Firms
Source: www.cfosurvey.org June 2009 survey. SeeCampello, Giambona, Graham, and Harvey
Units = months
52Global Business Outlook Duke University Winter 2009
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Global Business Outlook Duke University Winter 2009 53
How would you rate your employees’ morale level? Fair + Poor, 2009Q4
5.5% 4.9%
14.6%
39.1%36.1% 35.7%
33.0%
55.3%
0%
10%
20%
30%
40%
50%
60%
USA Europe Asia China
Year-end 2007 Now
Source: www.cfosurvey.org
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Global Business Outlook Duke University Winter 2009 54
Relative to 2008, does your company plan to adjust its target compensation mix for 2010?
Net percentage change, 2009Q4
-20%0%
20%40%60%
USA Europe Asia
Salary
Equity-based
Bonus
Source: www.cfosurvey.org
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Global Business Outlook Duke University Winter 2009 55
Relative to 2008, does your company plan to adjust its target compensation mix for 2010?
Net percentage change, 2009Q4
19.1%
0.0%
41.2%
3.7%0.0%
22.6%
-1.0%
50.0%
15.7%
-10%
0%
10%
20%
30%
40%
50%
60%
USA Tech Sector Manu Sector
Salary Equity-based Bonus
Source: www.cfosurvey.org
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Global Business Outlook Duke University Winter 2009 56
Among companies that have taken action, will you restore these areas to pre-recession levels in
2010? 2009Q4
16.3%18.7%
35.9%33.3%
31.8%32.9%
9.0%15.2%
10.7%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Reduced WorkforceEliminated or Reduced Overtime
Reduced Work HoursReduced Wages
Furloughed EmployeesReduced 401(K) Match
Reduced Contribution to Health BenefitsReduced Contribution to Other Benefits
Outsourced Employees
USASource: www.cfosurvey.org
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Global Business Outlook Duke University Winter 2009 57
Among companies with reduced growth prospects, they are reduced because . . .
2009Q4
55.2%
48.0%
46.0%
35.6%
18.0%
0% 10% 20% 30% 40% 50% 60%
Deep Cuts in Workforce
Reduced Spending on Training
Reduced Spending on Marketing and Advertising
Delayed or Turned Down Attractive Investment Opportunities
Cut R&D Spending
USA
Source: www.cfosurvey.org
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Global Business Outlook Duke University Winter 2009 58
Why are banks less willing to makes loans today vs. Summer 2008 (pre-crisis)? 2009Q4
79.0%
43.5%
37.4%
35.0%
31.3%
23.8%
19.2%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
More conservative lending standards
Covenants too restrictive
High lending rates
View my company as too restrictive
Care less about servicing my company
Process takes too long
Bank will not fund our project
USA
Source: www.cfosurvey.org