Feverish Stock Price Reactions to COVID-19
Review of Corporate Finance Studies, Volume 9, Issue 3, November 2020, Pages 622–655
58 Pages Posted: 9 Mar 2020 Last revised: 22 Aug 2021
Date Written: June 16, 2020
Market reactions to the 2019 novel coronavirus disease (COVID-19) provide new insights into how real shocks and financial policies drive firm value. Initially, internationally oriented firms, especially those more exposed to trade with China, underperformed. As the virus spread to Europe and the United States, corporate debt and cash holdings emerged as important value drivers, relevant even after the Fed intervened in the bond market. The content and tone of conference calls mirror this development over time. Overall, the results illustrate how anticipated real effects from the health crisis, a rare disaster, were amplified through financial channels.
Keywords: Cash holdings, Conference calls, Corporate debt, Coronavirus, COVID-19, Event study, Financial crisis, Global Value Chains, International trade, Leverage, Pandemic, Rare events, SARS-CoV-2, Tail risk
JEL Classification: G01, G02, G14, G15, F15, F23, F36
Suggested Citation: Suggested Citation