 How important is social trust during the COVID-19 crisis period? Evidence from the Fed announcementsJournal of Behavioral and Experimental Finance, 2020, vol. 28, issue C Abstract: During the COVID-19 crisis period, firms headquartered in high social trust US states perform better than their counterparts from the low social trust states. Stock returns over the crisis period are 3 to 4 percentage points higher, on average, if social trust increases by one standard deviation. The association is stronger for firms of more affected industries (COVID-19 industries). More specifically, a one standard deviation increase of social trust associates with a 6.45% increase of CAR if firms belong to the COVID-19 industries. Next, I analyze the stock market reactions to the Fed’s announcements on March 23, 2020. The results show that firms headquartered in the high trust states benefit less from the announcements because these firms can access to other external financings cheaply. The average three-day announcement CAR and BHAR (FF 3-factor adjusted) are higher by 2.5% and 2.6% respectively if firms headquartered in low trust states. Keywords: Social trust; COVID-19 crisis period; Event study; Leverage; The Fed announcements; Abnormal returns (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:28:y:2020:i:c:s2214635020303142 DOI: 10.1016/j.jbef.2020.100387 Access Statistics for this article Journal of Behavioral and Experimental Finance is currently edited by Michael Dowling and Jürgen Huber More articles in Journal of Behavioral and Experimental Finance from Elsevier |
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