Working Paper: NBER ID: w27055
Authors: Wenzhi Ding; Ross Levine; Chen Lin; Wensi Xie
Abstract: Using data on over 6,000 firms across 56 economies during the first quarter of 2020, we evaluate the connection between corporate characteristics and stock price reactions to COVID-19 cases. We find that the pandemic-induced drop in stock prices was milder among firms with (a) stronger pre-2020 finances (more cash, less debt, and larger profits), (b) less exposure to COVID-19 through global supply chains and customer locations, (c) more CSR activities, and (d) less entrenched executives. Furthermore, the stock prices of firms with greater hedge fund ownership performed worse, and those of firms with larger non-financial corporate ownership performed better. We believe ours is the first paper to assess international, cross-firm stock price reactions to COVID-19 as functions of these pre-shock corporate characteristics.
Keywords: COVID-19; Corporate Characteristics; Stock Price Reactions; Corporate Social Responsibility
JEL Codes: F23; G3; I10; M12; M14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| stronger financial conditions (G19) | milder stock price declines (G19) |
| less exposure to covid19 (I14) | less severe stock price declines (G19) |
| greater CSR activities (M14) | better stock performance (G17) |
| entrenched executives (D73) | worse stock performance (P17) |
| ownership structure (G32) | stock price reactions (G19) |