Table 3.
Corporate financial conditions and stock returns in response to COVID-19.
The table reports regression results analyzing how stock prices respond to the COVID-19 pandemic as functions of pre-pandemic corporate financial conditions. The dependent variable is the weekly stock return of each firm. COVID19 is the weekly growth rate of the number of confirmed COVID-19 cases in an economy. To measure a firm's financial conditions, we use Firm Size, Leverage, Cash, profitability [ROA, ROA (Operating Income), ROA (EBITDA), or ROA (EBIT)], Undrawn Credit, and Maturing Debt. The analyses cover the period from January 2, 2020 through May 22, 2020. The Appendix provides detailed variable definitions. We include firm, industry (two-digit Standard Industrial Classification) by week, and economy by week fixed effects. Robust standard errors clustered at the economy level are reported in parentheses. ***, **, and * denote significance levels at 1%, 5%, and 10%, respectively.
| Weekly Stock Return | |||||||
|---|---|---|---|---|---|---|---|
| Variable | (1) | (2) | (3) | (4) | (5) | (6) | (7) |
| COVID19 | -1.422*** | ||||||
| (0.241) | |||||||
| Firm Size * COVID19 | 0.085** | 0.124*** | 0.124** | 0.128** | 0.138** | 0.121** | |
| (0.041) | (0.041) | (0.056) | (0.055) | (0.060) | (0.058) | ||
| Leverage * COVID19 | -1.236*** | -1.628*** | -1.456*** | -1.645*** | -1.535*** | -1.556*** | |
| (0.281) | (0.277) | (0.228) | (0.307) | (0.301) | (0.290) | ||
| Cash * COVID19 | 0.933** | 1.897*** | 1.852*** | 1.877*** | 1.862*** | 1.710** | |
| (0.428) | (0.557) | (0.629) | (0.654) | (0.634) | (0.640) | ||
| ROA * COVID19 | 1.768*** | 1.838** | 2.043** | ||||
| (0.334) | (0.901) | (0.964) | |||||
| Undrawn Credit * COVID19 | 0.866* | 0.966 | 0.903 | 0.946 | 0.908 | ||
| (0.490) | (0.600) | (0.548) | (0.582) | (0.573) | |||
| Maturing Debt * COVID19 | -0.510*** | -0.501*** | -0.448*** | -0.507*** | |||
| (0.123) | (0.128) | (0.122) | (0.123) | ||||
| ROA (Operating Income) * COVID19 | 3.144** | ||||||
| (1.264) | |||||||
| ROA (EBITDA) * COVID19 | 2.781*** | ||||||
| (0.570) | |||||||
| ROA (EBIT) * COVID19 | 3.017*** | ||||||
| (0.635) | |||||||
| Firm fixed effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Industry-time fixed effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Economy-time fixed effects | No | Yes | Yes | Yes | Yes | Yes | Yes |
| Number of observations | 141,449 | 126,711 | 86,216 | 79,877 | 79,856 | 78,263 | 79,583 |
| Adjusted R-squared | 0.433 | 0.503 | 0.534 | 0.539 | 0.540 | 0.539 | 0.540 |
| Number of firms | 6,744 | 6,041 | 4,110 | 3,808 | 3,807 | 3,731 | 3,794 |