COVID-19

  • 详情 COVID-19 exposure, financial flexibility, and corporate leverage adjustment
    This study examines how firm-level exposure to the COVID-19 pandemic affects the speed of leverage adjustment among 3260 US-listed firms from 2019q1 to 2022q1. Using a novel measure of COVID-19 exposure, we find that higher exposure significantly reduces the speed at which firms adjust their leverage towards target levels. This effect is more pronounced for financially constrained firms and those operating in competitive markets. We further show that COVID-19 exposure adversely impacts corporate liquidity, default risk, and financial flexibility. Our findings highlight the role of exogenous shocks in shaping corporate financing decisions.
  • 详情 Does Uncertainty Matter in Stock Liquidity? Evidence from the Covid-19 Pandemic
    This paper utilizes the COVID-19 pandemic as an exogenous shock to investor uncertainty and examines the effect of uncertainty on stock liquidity. Analyzing data from Chinese listed firms, we find that stock liquidity dries up significantly in response to an increase in uncertainty resulting from regional pandemic exposure. The underlying reason for the decline in stock liquidity during the pandemic is a combination of earnings and information uncertainty. Funding constraints, market panic, risk aversion, inattention rationales, and macroeconomics factors are considered in our study. Our findings corroborate the substantial impact of uncertainty on market efficiency, and also add to the discussions on the pandemic effect on financial markets.
  • 详情 The Temporal and Spillover Effects of Covid-19 on Stock Returns: Evidence from China's Provincial Data
    Based on 31 provinces, municipalities, and autonomous regions in mainland China, this paper explores the temporal and spillover effects of the provincial COVID19 pandemic on stock returns. The results show that stock returns are significantly and negatively correlated both with the pandemic in the firm’s headquartered province (referred to as, local province), and the pandemics in other provinces (referred to as, non-local provinces). By multiple time dimensions analysis, we find that at the weekly (monthly) level, the impact of the pandemic in local province on stock returns is larger (weaker) than the pandemics in non-local provinces, showing the temporal (spillover) effects. Mechanism analysis shows that COVID-19 can quickly reduce investors’ attention to stock market. The heterogeneity analysis shows that firms owned by state, with bad CSR, or a higher proportion of shares held by the largest shareholder are more affected by COVID-19. After replacing samples and time intervals, the results remain robust.
  • 详情 Covid-19 and Preferences for Subway Proximity: Evidence from the Chinese Housing Market
    This paper investigates the impact of Covid-19 outbreak on households’ preferences for subway proximity, using housing transaction data from eight major cities with the highest metro commuting volumes. Contrary to what we expect from remote working which has been popular since Covid-19 outbreak, we find no evidence of a smaller housing price premium for subway proximity after the outbreak, based on a difference-in-difference empirical strategy.
  • 详情 Optimizing Policy Design—Evidence from a Large-Scale Staged Fiscal Stimulus Program in the Field
    Using iterative experiments to uncover causal links between critical policy details and outcomes helps to optimize policy design. This paper studies a large-scale staged fiscal stimulus program conducted during the COVID-19 pandemic, in which a provincial government in China disbursed digital coupons to 8.4 million individual accounts in consecutive waves and updated the program design each time. We find that ruling out unproductive program features leads to a pattern of increasing treatment effects over the waves and that program design matters more than the size of the fiscal stimulus in boosting spending. Our results show that (i) general coupons with no constraints on where the vouchers can be redeemed are more effective than specialized coupons in stimulating consumption in the targeted sectors; (ii) coupon packets with fewer denominations and shorter redemption windows tend to be more effective; and (iii) low-income residents and non-local residents are equally or even more responsive to the coupon program than other groups. Our results illustrate that generating variations in iterative policy experiments, combined with a timely assessment of individuals’ responses to marginal incentives, optimizes program design.
  • 详情 Do Investors Herd Under Global Crises? A Comparative Study between Chinese and the United States Stock Markets
    This paper investigates the impact of two global crises, the global financial crisis and the COVID-19 crisis, on herding behavior in the Chinese and U.S. stock markets. We find no evidence of herding behavior during these two global crises in the U.S. stock market, yet significant herding emerges under the COVID-19 crisis in Chinese mainland stock market. Additionally, the observed herding behavior in mainland China is primarily driven by sentiment. Our results reveal and explain the differences in the effects of financial crisis and public health crisis on herding behavior, as well as variations between emerging and developed stock markets.
  • 详情 Do Enterprises Adopting Digital Finance Exhibit Higher Values? Based on Textual Analysis
    In this paper, we investigate whether those enterprises adopting digital finance exhibit higher values. On the basis of the constructed fintech-related lexicon developed by the machine learning-based Word2Vec model, we employ the frequency of fintech-related words (phrases) in the management discussion sections of annual reports as a proxy variable for the degree to which enterprises apply digital finance. We utilize panel data regression and mediation models based on data of Chinese A-share listed companies from 2016 to 2022 and explore the impact of this degree of digital finance application on enterprise value. We find that the degree to which enterprises apply digital finance elevates their values. The in-depth integration of digital technology and finance directly enhances enterprise value by reducing financing costs. Additionally, the effects are more evident among small-scale firms and enterprises located in regions with lower marketization levels. However, in the face of the impact of the COVID-19 pandemic, the positive effects on enterprises are relatively low.
  • 详情 Crisis Control in Top-down Bureaucracy: Evidence from China's Zero-Covid Policy
    This study investigates the compliance of local Chinese officials with the zero-Covid policy throughout the COVID-19 pandemic. By examining biographical data from political elites and using a prefecture-day data set on risk levels – an indicator reffecting the status of zero-Covid policy - we discover a significant impact of prefecture leaders’ promotion incentives on their response to COVID-19 outbreaks. Our empirical analysis reveals that leaders with stronger promotion incentives tend to exhibit increased reactions to emerging cases. Evidence shows that such a phenomenon is driven by the different choices of the prefecture leaders facing relatively larger-scale COVID-19 outbreaks. Furthermore, local governors whose jurisdictions are more economically developed tend to enforce more stringent mobility restrictions. However, for prefecture leaders who oversee more developed regions and possess strong promotion incentives, the combined effects of these two factors tend to balance each other out in terms of pandemic response. These results suggest a natural tension between demands for crisis management during the pandemic and routine performance in economic development within the political framework of China.
  • 详情 When Local and Foreign Investors Meet Chinese Government's Risk Perception About Covid-19
    This paper examines the different responses of local and foreign investors to host government risk perceptions in the context of extreme events. We develop COVID-19 attention indices that capture attention related to COVID-19 according to China Central Television (CCTV) news program and further construct the government’s risk perception (GRPC) measure about COVID-19. Given the cross-listed AH-shares in China, we find that GRPC caused the extreme movement of stock markets by applying the multi-quantile VaR Granger causality approach. The results show that the reaction of cross-listed stocks in the A-share market is more inflexible than that in the H-share market during the outbreak period of the pandemic, foreign investors follow GRPC as a weather vane than local investors, and both types of investors are more concerned about the pessimism of GRPC. In the period of epidemic normalization, local and foreign investors prefer the optimistic attitude conveyed by the Chinese government.
  • 详情 The Political Economy of COVID-19 in China
    This research analyses the ramifications of the COVID-19 pandemic on China's economy, examining the divergent epidemic prevention policies used by local governments. Empirical evidence highlights that the emergence of COVID-19 cases correlates with a 1.13% reduction in quarterly GDP growth. However, when a city's secretary maintains an informal ties with the provincial secretary, GDP growth remains resilient. Analyzing micro-level data, we observe that city secretaries with informal ties tend to enact flexible anti-contagion measures. This flexibility stems from a decreased likelihood of reprimand for virus transmission. Such shields exclusively manifests when incumbent provincial secretaries share informal ties with central leadership. This underscores the interplay of political networks in shaping localized economic responses.