Page 193 - Accelerating out of the Great Recession

APPENDIX A

careful not to look at absolute performance. After all, some
industries tend to fare well even during bad times (notably food,
alcohol and tobacco, utilities, and health care). So we looked at
relative performance, identifying companies that outperformed
their competitors in terms of total shareholder return and earn-
ings before interest and taxes (EBIT) margins.
The precise criteria for selecting outperformers varied among
recessions owing to the different data available for the periods
and because of the relative importance of different metrics at dif-
ferent times. For companies in the Great Depression, we defined
outperformers as those with a total stock return performance that
was better than the industry average from the 1929 peak through
the 1932 trough in the market and from the 1929 peak through
the 1936 peak. Our Great Depression sample totaled 90 compa-
nies—a number that accounted for around two-thirds of the
1929 capitalization of the New York Stock Exchange.
We defined outperformers from the 1970s and 1980s as
those with an average EBIT margin for the period that was
greater than the mean in their industry and with an average
annualized total shareholder return greater than the industry
median. The sample comprised companies listed on the
Standard & Poor’s (S&P) 1500 Composite Index.
For Japan’s Lost Decade, we defined outperforming compa-
nies as those with a greater growth in market capitalization and
EBIT than the industry average and an increase in market share
during the period. In order to develop a broad-based compari-
son, we used a database of nearly 5,000 Japanese companies
from the 1990s and early 2000s.
Once we had compiled the list of outperformers, we took a
deeper look at what made those companies successful. We stud-
ied the markets in which these outperforming companies oper-

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