Work from Home, Managerial Sentiment, and Corporate Liquidity Management under COVID-19

60 Pages Posted: 30 Apr 2021 Last revised: 14 Feb 2022

See all articles by Lilian Ng

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Jing Yu

The University of Sydney; Financial Research Network (FIRN)

Linyang Yu

York University - Schulich School of Business

Date Written: December 30, 2021

Abstract

COVID-19 pandemic lockdowns and mobility restrictions have forced many individuals to work from home, leading to diverse isolation-induced mental health consequences. Using the granularity of foot traffic data, we show that prolonged work from home during the COVID-19 outbreak dampens managerial sentiment. This baseline result is robust to the identification test exploiting the implementation of stay-at-home orders across the United States using the stacked regression approach. Further analyses suggest that social isolation and work stress are two potential psychological mechanisms through which work from home affects managerial sentiment. Finally, using a path analysis design, we find that the reduced sentiment has a real effect. The induced negative sentiment elevates managers' perceived risk, driving them to accumulate more cash in response to the COVID-19 cash-flow shock. However, such cash buildup destroys shareholder value.

Keywords: COVID-19, Work from Home, Managerial Sentiment, Corporate Cash Policy

JEL Classification: G02, G32, G39

Suggested Citation

Ng, Lilian and Yu, Jing and Yu, Linyang, Work from Home, Managerial Sentiment, and Corporate Liquidity Management under COVID-19 (December 30, 2021). Available at SSRN: https://ssrn.com/abstract=3837134 or http://dx.doi.org/10.2139/ssrn.3837134

Lilian Ng

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Jing Yu (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Linyang Yu

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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