Impact of Anti-Pandemic Policy Stringency on Firms’ Profitability during COVID-19

Lasha Labadze () and Mohamed Sraieb
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Lasha Labadze: Finance Department, American University of the Middle East, Egaila 54200, Kuwait

Sustainability, 2023, vol. 15, issue 3, 1-15

Abstract: The coronavirus (COVID-19) pandemic devastated all economies across the world and triggered a deterioration in firms’ financial performance. However, some sectors turned out to be more vulnerable while others continued to perform well during the crisis period. Given this fact, we conducted a comprehensive study to estimate the impact of the COVID-19 pandemic on firms’ profitability in Europe. We used a dynamic panel data approach and a system generalized method of moment (System-GMM) model to investigate (i) which sectors were affected and what was the magnitude of the impact on firms’ profitability, and (ii) whether the stringency of anti-pandemic policies such as workplace closures and travel bans impacted firms unevenly. We find that COVID-19 caused about a 25% decline in the profitability of firms. The most impacted sectors were Consumer Discretionary, Consumer Staples, and Industrials, where profitability declined from 20 to 48%. We also find that firms in countries with high anti-pandemic policy stringency lost about 19% more in profitability than in the rest of the countries in Europe during 2020.

Keywords: COVID-19; policy stringency; financial performance; panel data; System-GMM (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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