The COVID-19 pandemic and shareholder value: impact and mitigation

Abstract

ABSTRACT The financial implications of the worldwide COVID-19 pandemic and the effective mitigation of the negative effects are the subject of an ongoing debate. We aim to empirically substantiate this debate. Based on a sample of 4,032 publicly traded U.S. and Chinese firms, we conduct an event study and find that the COVID-19 pandemic is associated with a substantial decrease in shareholder value, significantly varying between U.S. and Chinese firms and across industries. We further identify structure- and supply chain-related firm factors that mitigate the negative impact. Specifically, we find that smaller firms experience a less negative impact on shareholder value, challenging established findings. Our results also suggest that a lower dependence on physical assets, a shorter trade cycle, and a higher degree of vertical integration attenuate the negative impact on shareholder value. Our findings provide important insights for managers and policymakers. We recommend managers to reduce the dependency on business models that strongly rely on physical assets, to streamline trade cycles, and to reduce supply chain complexity. From a policy perspective, we emphasise the importance of more industry-specific granularity of public support measures.