System Relevance and Firm Performance Due to COVID-19

Böhm Michael J. () and Qendrai Pamela ()
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Böhm Michael J.: TU Dortmund and IZA, Dortmund, Germany
Qendrai Pamela: IZA and Goethe University Frankfurt, Bonn, Germany

German Economic Review, 2023, vol. 24, issue 4, 349-410

Abstract: We study the impact of COVID-19 on firm performance. Using financial accounts of a large number of German firms, we document that industry affiliation is an important economic dimension of the crisis. Motivated by this fact, we analyze an important industry-specific regulation, system relevance, which allows businesses to remain open in times of lockdown and other restrictions. A difference-in-differences estimation strategy shows that relative revenues of system-relevant firms increase by 6–9 percent and profits by 17–25 percent due to COVID. Controlling for channels that are arguably not driven by the system-relevance regulation, the impact on revenues decreases but remains significant. Overall, results indicate that regulations affecting the ability to operate as well as industry-level shocks play important roles for firm performance during a pandemic-induced crisis.

Keywords: firm performance; industry shocks; system relevance; COVID-19 (search for similar items in EconPapers)
JEL-codes: H12 L25 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1515/ger-2023-0070

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