The role of non-critical business and telework propensity in international stock markets during the COVID-19 pandemic

Thiago Silva (), Paulo Victor Berri Wilhelm and Benjamin Tabak

Journal of International Financial Markets, Institutions and Money, 2022, vol. 79, issue C

Abstract: We investigate the impact of non-critical business and telework propensity on stock prices during the COVID-19 pandemic using panel data comprising 15,238 firms across 46 countries. After eight months of the COVID-19 outbreak, we find that firms operating in non-critical industrial groups have stock prices 6.52% lower than firms in the same subsector that operate in essential industrial groups. We also examine corporate characteristics that exacerbated or mitigated this effect. We find that firms in non-critical industrial groups with high leverage, high human resource management inefficiency, and low intangible intensity before the pandemic suffered even more. For non-critical firms, we find that a one-standard-deviation increase in the subsector’s telework propensity results in a 10.20% increase in the firm’s stock price relative to firms in the same sector. Our research provides valuable empirical evidence for policymakers to understand the trade-off between containing the spread of the virus and restricting non-essential businesses, monitoring firms with specific corporate characteristics, and providing extraordinary support to those with a low propensity to telework during pandemics.

Keywords: COVID-19; International stock markets; Firm resilience; Telework; Critical industries; Difference-in-differences; Public policy (search for similar items in EconPapers)
JEL-codes: E22 G01 G12 G14 G32 J00 M50 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:79:y:2022:i:c:s1042443122000798

DOI: 10.1016/j.intfin.2022.101598

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