This morning, I've been trying to rewrite the paragraph from Fligstein and Shin 2007, that I discussed on Monday. Here's what I've come up with so far:
As Friedman (1985) has shown, U.S. corporations were under siege from two forces during the 1970s: stagflation and foreign competition. The period was marked, first, by high unemployment and high inflation. Slow economic growth meant that the major markets of many firms stopped expanding, causing their profits to stagnate. High inflation led to high interest rates, which pushed investors toward fixed-income securities like government bonds and away from stocks, causing stock prices to drift downward over the decade. Inflation also caused firms to have assets on their books that were increasing in value, but from which they were not earning higher profits. Since many measures of firm performance were based on returns to assets or investments, this meant that firms looked even less profitable. Meanwhile, American firms faced increased foreign competition, particularly with Japan. They lost market shares and in some cases, like consumer electronics, entire markets. Taken together, profit margins were squeezed by inflation, competition, and slow economic growth. By the late 1970s, with low stock prices, undervalued assets, and slow growth in sales and profits, many large U.S. firms had stock prices that valued them as being worth less than the value of their assets and cash.
I've moved the reference up into the first sentence to signal that Friedman 1985 is the basis of the whole paragraph. (But I've also looked briefly at Friedman 1985, and I'm having a hard time understanding what the reference refers to exactly. This isn't my field, so perhaps that's to be expected, but I'll look more closely at that issue on Friday.)
It still isn't perfect. The reader can probably be expected to know that "stagflation" means the combination of high unemployment and high inflation and this may make the second sentence unnecessary. The "meanwhile" is intended to mark the tradition to the second force, but this may need a bit more work, which I'll also try to get to in my next post.