Comparative evidence on the impact of the COVID-19 outbreak and vaccine discovery on the global transportation industry

Abstract

This research investigated the daily abnormal stock returns of 727 listed companies from 63 countries. We tested the impact of two major COVID-19 related events—(1) the declaration by the World Health Organisation of the global pandemic and (2) the vaccine discovery announcement by Pfizer/BioNTech—on transportation stock price reactions. We found that the pandemic declaration event negatively affected transportation stocks, whereas the vaccine announcement had a positive effect. Passenger markets were more affected than freight markets. Airlines stocks were most struck during the pandemic, whereas railroad companies were unaffected. However, airlines were the best performers following the vaccine discovery event. During the pandemic incident, European transportation firms were hit to a large extent; however, they also rebounded well during the vaccine event. Transportation firms in emerging markets were hit more than those in developed markets; however, both recovered to the same degree during the vaccine event. Transportation firms from countries with higher exposure to China were affected less than those with lower exposure during both events. Our implications are relevant to how investors make investment decisions surrounding market uncertainty. Moreover, corporate managers can refer to the findings when they formulate their firm’s financial policies and operations to respond to stock market reactions in the wake of the pandemic. Our results can also help policymakers evaluate and deploy effective policies to boost investor confidence and keep transportation firms viable during a crisis. Overall, the findings can be used for future policy formulation in the transportation industry.

1. Introduction

Today, businesses worldwide are sensitive and vulnerable to external factors, such as disease outbreaks. The spread of coronavirus disease 2019 (COVID-19), first detected in Wuhan, China, affects people’s lives, travel, trade, transportation, and supply chains. COVID-19 caused immense economic downturns and disrupted the normal flow of goods and services within supply chains, directly resulting in revenue shocks for many firms. Subsequently, this likely decreases shareholder wealth. Despite the important economic role of transportation, the extent to which the COVID-19 pandemic affects transportation firm performance worldwide remains understudied compared with finance literature overall. Some recent transportation studies employed event study methodology to examine stock price reactions to the pandemic in a single sector, such as the airline (Maneenop and Kotcharin, 2020) or shipping (Gavalas et al., 2022, Kamal et al., 2021, Marobhe, 2022) industry. However, we found no comprehensive comparative analysis of the economic impact of COVID-19 on listed transportation firms worldwide that covers various transportation sectors. More specifically, research on stock price reactions of airfreight, trucking, and railroad companies to COVID-19 related news announcements is lacking.

In addition, some studies explored the impact of COVID-19 on stock price reactions only in specifically developed markets, such as the US (Atems and Yimga, 2021, Chen et al., 2022, Gavalas et al., 2022, Kamal et al., 2021) or Europe (Kökény et al., 2022). Although emerging economies contribute approximately 42% of the world’s gross domestic product (Cavusgil et al., 2021), we still lack understanding regarding the extent to which COVID-19-related news affects transportation firm performance in emerging markets. Before COVID-19, emerging economies had an important role in global production networks. However, Vidya and Prabheesh (2020) found extreme trade interconnectedness and connectivity reduction among the top 15 trading countries (i.e. China, the US) in 2020Q1. Moreover, Ramelli and Wagner (2020) found that US firms’ stock prices reacted differently upon their exposure to trade with China. They also suggested that firms that exported more to China experienced lower returns during the incubation (January 2–17) and outbreak periods (January 20–February 21) in 2020. However, the relationship between exposure to China and transportation firms’ stock reactions remains unclear. This also motivates us to question how exposure to China could potentially explain stock price reactions to COVID-19-related news announcements.

As a once-in-a-century global pandemic, COVID-19 provides an opportunity to study how related health news announcements affect the daily abnormal stock returns of transportation companies worldwide. As a forward-looking measure of firm performance, the stock price is important for determining a firm’s future prospects. To conduct the empirical analysis, we used event study methodology to explore the economic impact on global transportation stock returns of two important world events: (1) the World Health Organisation’s (WHO) declaration of a global pandemic, and (2) Pfizer/BioNTech’s announcement of discovering a vaccine against COVID-19 on November 9, 2020. These two unique events each had a large impact on the transportation industry, which is a topic that requires more in-depth research. The current research focuses on the effects of the COVID-19 pandemic at the global or international level. They also happened for the first time in history, making us more interested to investigating the impact of the announcement on stock markets. This is the main research objective, which is in line with several studies that used only two events in the event study. For example, Martins and Cros (2022) examine the WHO's declaration of COVID-19 as a global pandemic and the effectiveness of the Pfizer–BioNTech COVID-19 vaccine in the airline industry. Kamal et al. (2022) use the COVID-19 outbreak news and the invention of the COVID-19 vaccine in the maritime shipping industry. Meanwhile, Kumari et al. (2022) focus on the WHO named the B.1.617 variant as a “variant of interest” and the announcements of travel bans in the airline industry. Similarly, Sakawa and Watanabel (2023) examine the COVID-19 outbreak on the Princess Diamond cruise ship and the announcement of tightened border control in the Japanese shipping industry. In addition, the transportation business is tied to global events rather than limited to local influences. Therefore, these two selected events motivated us to explore their impact on stock price reactions across the modes of transportation.

Several papers demonstrate the effect of the COVID-19 pandemic on stock prices. For example, Atems and Yimga, 2021, Chan et al., 2022, Ding et al., 2021, Kamal et al., 2021, Marobhe, 2022, Martins and Cro, 2022, Ramelli and Wagner, 2020, and Sakawa and Watanabel (2023) investigate stock market reactions in the time of COVID-19 pandemic shock. In addition, we were motivated to fill the research gap that Gong (2009) identified in calling for more transportation research that applies the event study approach. Moreover, the purpose of this study was to answer Zhang and Hayashi’s (2022) call for research to increase our understanding of the impact of COVID-19 on the passenger transportation sector.

To the best of our knowledge, this study is among the first to use a comprehensive analysis to distinguish how positive and negative information determines stock prices in the transportation industry. Notably, compared with positive news, negative news likely has a more pronounced impact on transportation stock returns. Our study contributes to the literature investigating the relationship between transportation stock price reactions and COVID-19-related health news announcements. However, our study is distinguished from others (Gavalas et al., 2022, Kamal et al., 2021, Maneenop and Kotcharin, 2020, Marobhe, 2022) in various ways. First, it compares the effects of the crash event and vaccine discovery event on the stock prices of transportation firms worldwide. Comparing these two unique events fits our study’s focus and industry, which is scant in prior literature. Second, it conducts various subgroups of studies (e.g., emerging versus developed markets), which have received less attention from previous studies. Earlier studies emphasised the impact of COVID-19 on a single sector and particular country using a small number of firms (Atems and Yimga, 2021, Gavalas et al., 2022, Kamal et al., 2021). A few studies have used a large sample of studies conducted across different regions to scrutinise how transportation firms reacted to news reports announcing the discovery of a COVID-19 vaccine. Finally, this study reflects how financial stability is important for transportation firms because their firm value relates to their ability to fund their operations and sustain the future business. Policy implementation to stabilise financial markets and the economy should be included in balance health-related policies and financial stimulus plans to maintain the survival of the transportation industry.

The remainder of this paper is structured as follows. Section 2 provides a review of the related literature and hypothesis development. Section 3 introduces the data and methodology. Section 4 presents an empirical analysis. Section 5 discusses the empirical findings and policy implications. Section 6 concludes the paper.

2. Literature review and research hypotheses development

2.1. Transportation industry background

Before the COVID-19 outbreak, demand for passenger transportation and global freight was estimated to surge nearly threefold between 2015 and 2050 (Organisation for Economic Cooperation and Development, 2019), while air freight was estimated to reach the highest compound annual growth rate compared with other transportation sectors. However, global uncertainty and fear generated by the pandemic have limited economic activities (Baker et al., 2020), as well as changed passenger travel behaviour (Zhang et al., 2021) and mode preferences (Abdullah et al., 2020). The spread of COVID-19 has severely impacted passenger and freight transport mobility and connectivity. Following a series of government restrictions implemented worldwide, overall transport systems and all stages of the global supply chains were disrupted. Although the transportation industry has been among those most severely impacted by supply chain disruption triggered by the pandemic (Wang et al., 2022), the effects of COVID-19 have not been uniform across all sectors of the industry (Tardivo et al., 2021). However, previous studies have investigated the impact of COVID-19 on passenger markets (Chen et al., 2022, Mumbower, 2022, Shortall et al., 2021, Zhang et al., 2021), express logistics (Baştuğ and Yercan, 2021; Yang et al., 2021b), and freight markets (Fang and Guo, 2022, Narasimha et al., 2021, Notteboom et al., 2021). This section divides the transportation industry background into two broad markets: passenger and freight transportation.

2.1.1. Passenger transportation

Interstate travel networks (i.e., railways and buses) play a crucial role in national economies, livelihoods, and migration across the Asia-Pacific region, whether for work or study. When metros in Wuhan were stopped from January to March 2020, other cities employed different practices, ranging from suspended operations, closed stations, and adjusted operating hours (Buragohain et al., 2020). Passengers who travelled on long trips had no transportation choices available for long trips during the first month of the COVID-19 outbreak. This caused passengers in some large cities to demand extra and express trains; however, passenger rail operators in each region experienced different losses due to different degrees of importance for rail markets. Specifically, parts of East Asia (e.g., China, Japan, and South Korea) and Western Europe (e.g., Germany and France) were the most impacted in terms of lost revenue (Union Internationale des Chemins de fer, 2020).

Vickerman (2021) noted that world passenger demand dropped by 80–95% during the initial lockdown. Metros in Asian countries showed less decline and returned to service faster, reaching approximately 70% of normal levels by July 2020. However, other parts of the globe, such as Europe and the Americas, had slower returns to normal levels. Similarly, the demand for all transport modes dramatically declined at the beginning of the initial lockdown in the UK (Vickerman, 2021). Tardivo et al. (2021) reported that passenger and freight transport worldwide experienced the same situation, in that many countries’ borders were partially or entirely closed. Activities related to transportation services, such as tourism, almost disappeared in the first half of 2020 (Notteboom et al., 2021). This decline in traffic volume meant revenue losses, creating a financial problem for transportation operators.

For example, compared with other sectors, air transportation suffered the most, owing to border closures and international travel restrictions that dramatically decreased air traffic. Subsequently, aircraft were grounded. The global pandemic has changed travel behaviour regarding travel volume and transit use (Bian et al., 2021). Atems and Yimga (2021) suggested that major US airline stock prices experienced negative returns because of economic uncertainty surrounding the COVID-19 shock, which diminished the current and expected future cash flows of airline companies. This has also created volatility in the airline industry resulting from investor sentiment in response to COVID-19 pandemic news. While some speculative investors may trade more based on expectations of government loan support measures, stock prices for airlines have shown even more significant decreases because of the drop in demand for travel triggered by the pandemic (Atems and Yimga, 2021). Owing to the industry's capital-intensive nature, investors may worry and question how airlines can bear such costs when revenue declines. In general, transportation companies such as airlines have large numbers of employees. Thus, with revenue shortfalls, investors may question how firms are able to manage such high fixed costs during turbulent times and access external funds. This potentially associates with the explanation power for stock price reaction.

2.1.2. Freight transportation

As the COVID-19 pandemic spread globally, industry-wide cargo tonne-kilometres dropped by 15.2% in March 2020 (International Air Transport Association, 2020). In China, the air cargo sector was less affected than air passenger traffic. Li (2020) reported that air cargo increased by 21.8% in May 2020. The rapid growth of cross-border e-commerce and express delivery has largely contributed to the air cargo industry. Li (2020) further noted that, even during the pandemic, new routes were opened for international e-commerce. During the pandemic, Yang et al. (2021b) reported that rising confirmed COVID-19 cases influenced the spatial and temporal distribution characteristics of express logistics demands in China. Governments and shippers demanded crucial goods (e.g., pharmaceutical and medical supplies), which led to a rise in air freight rates (Baştuğ and Yercan, 2021). Reduced fleet capacity and labour shortages had consequences for logistics chains, affecting the performance of logistics service providers. The new confirmed cases caused negatively impacted the inter-provincial express logistics. However, reopening businesses and production nationwide helped reduce the COVID-19 pandemic’s negative impact on express logistics (Yang et al., 2021b). Similarly, government restrictions to stop the spread of COVID-19 leads to panic buying and stimulate more home consumption, which affects transport volume and freight capacity, such as in food retail logistics in Germany (Loske, 2020). This is consistent with Schofer et al. (2022), who suggested that increased online shopping during the pandemic has strengthened demand for urban goods and merchandise.

However, some transportation companies, such as small trucking companies in the US, experienced dramatic declines in revenue and high driver turnover during the pandemic (Giunipero et al., 2022, Trick et al., 2021). Further, labour shortages, production shutdowns, and retail location closures lower freight opportunities overall. These significantly contribute to challenges for highly competitive business markets, such as trucking companies that require a sizeable operative workforce (Trick et al., 2021). Many shippers rely on trucking transport to move their goods to the domestic market and seaports or airports for international shipment (Trick et al., 2021). Road freight transportation generates a significant portion of gross domestic product, particularly in developing countries (Gonzalez et al., 2022). The COVID-19 pandemic caused shocks to road freight transportation on both the demand (e.g., dropped transport demand from the manufacturing sector) and supply (e.g., high costs due to government policies) sides, affecting the profitability of firms (Gonzalez et al., 2022), which has implications for trucking cash flow shocks.

Rail freight transportation faced a similar situation in terms of financial returns when experiencing a financial and economic crisis (Borca et al., 2021). In some areas, rail freight plays a crucial role in a high proportion of container transportation to and from a country’s hinterlands, as well as rail shuttles on intermodal rail services (Bergqvist and Monios, 2021). Bergqvist and Monios (2021) suggested that rail transport is helpful for the port when road congestion occurrs during a strike crisis. However, disruptions affect the reliability of freight movement in intermodal rail transport networks (Kramarz et al., 2021), which we argue potentially affects the financial performance of rail operators. Rail transportation plays a greater role in Asia and Europe (Rothengatter et al., 2021). In 2020, the Union Internationale des Chemins de fer (UIC) reported a shift from road to rail for freight activities during lockdowns. A rising modal shift was strong in China and Europe, despite border closures due to COVID-19 (Union Internationale des Chemins de fer, 2020). Schofer et al. (2022) further noted that intermodal rail freight is a component of pandemic resilience in the US freight markets. As the core freight system, railroads complement trucking capacity constraints and serve to facilitate growing e-commerce during the pandemic. Although North and Latin America had delays entering the crisis compared with Asia and Europe, when compared with passengers, freight revenue was less impacted globally (Union Internationale des Chemins de fer, 2020).

In the maritime sector, Michail and Melas (2020) explored the reaction of freight rates for dry bulks and tankers to COVID-19 and reported that dry bulks and dirty tankers were negatively affected by the pandemic. This is because demand reflected by port calls declined. Notteboom et al. (2021) provided an example in which the supply and demand shock from the COVID-19 pandemic impacted the container shipping industry. Owing to economic declines and changes in consumption patterns related to types of goods and services, a recession will lead to decreased demand for durable, discretionary, and capital goods. This has important implications for shipping demand. Several government restrictions worldwide led to a decline in global demand due to lower consumer and industrial confidence (Notteboom et al., 2021). When governments implemented containment measures, they damaged economies and production (e.g., labour shortages, obstacles to business activities, and financial disruption). Lockdowns in China and other Asian countries disrupted the global supply chain since China and several major Asian countries are global players in industrial production. Liner shipping companies have faced short-term difficulties adjusting their fleet capacity to match decreased demand and vessel utilisation. When restrictive government policies were implemented, Europe and North America halted industrial production, and consumer and business demand sharply declined. Disruptions to production in the global transportation network and logistics chains caused unexpected enormous losses (Baştuğ and Yercan, 2021). This potentially signals stock prices.

2.2. Theoretical background and hypothesis development

A large body of finance literature demonstrates that stock price reactions due to an event are the most efficient indicator of exchanges in financial performance (Basu, 1977, Brown and Warner, 1985). The notion of efficient capital markets (Fama, 1970) reflects cases in which the stock market reacts quickly and efficiently to announcements. When the public market receives such information, stock prices likely respond to capitalise on future costs, risks, and benefits associated with the event (Dam and Petkova, 2014). The efficient market hypothesis (Fama, 1970) is widely applied, with the stock price fully reflecting all available information. Firm value represents the present value of a firm’s expected future available cash flows.

According to other scholars, mood and anxiety can influence stock prices (Kaplanski and Levy, 2010). When investors receive news from the media about disruption, they may use various methods to take action. Alternatively, they may switch some investments from risky to safer assets. Hence, the role of information inflow is crucial for investors who may have fear or anxiety about media coverage of a disaster. Widespread media reports on a disaster can increase investors’ emotional responses and make them more pessimistic about stock prices (Kaplanski and Levey, 2010). This can potentially have a psychological effect on investors’ decision-making processes. Similarly, Corbet et al. (2021) found that two tragic events for a Malaysian airline had an immediate and substantial impact on the company’s share price. Therefore, as a rare disaster unfolds, we argue that COVID-19-related health news announcements should dramatically shift market participants’ attention.

Related literature employing the event study method, such as Kama et al. (2021) and Marobhe (2022), has examined the impact of WHO declaring COVID-19 to be a global pandemic on shipping firms listed on the New York Stock Exchange, reporting that the stock returns of these firms poorly performed because stringent restrictions decreased global shipping operations. Thus, the pandemic has caused worldwide production and trade to decline (Cullinane and Haralambides, 2021), subsequently affecting shipping subindustries. During the pandemic, it has been difficult for firms to take advantage of their resources, causing them more risk for future cash flows. Firm value, as represented by a firm’s expected future available cash flows, is likely to have been affected by announcements that COVID-19 had been declared a pandemic and a vaccine had been developed. These events may have impacted rates of return according to risk level changes. WHO’s declaration that COVID-19 has become a global pandemic potentially diminished firm value because demand shocks reduced future expected cash flows.

In summary, adverse events are considered bad news for shareholders, which has implications for short-term shareholder value. Bad mood and anxiety influence individuals’ investment decision, affecting stock price returns (Corbet et al., 2021, Kaplanski and Levy, 2010). For example, the SARS outbreak can provide an excellent example of how stocks react to a similar event. Specifically, stocks experienced negative returns following the news of the SARS outbreak (Chen et al., 2007). Transportation supply and demand are more severely affected by COVID-19 (Cullinane and Haralambides, 2021). This has increased uncertainty regarding future cash flows and increased operating costs, which could affect a company’s financial future and ability to raise external funds. In terms of operation disruption, firms may face difficulties meeting customer expectations, which can affect a company’s short-term profitability and implications for stock price changes.

Meanwhile, the vaccine event may change the required rate of return upon lower risk. Investors may have predicted that the uncertainty created by the pandemic could be overcome because of the vaccine discovery news. Transportation businesses can resume normal operations, improving revenue and, available cash flows. Thus, this optimistic news event could have potentially led to significantly increased stock prices. Some relevant transportation studies emphasised the impact of a positive news announcement on corporate events and stock returns. For example, Tamechika (2020) found that an economic stimulus policy, such as a subsidy, could promote positive stock returns for automobile firms. Similarly, Barrons et al. (2020) reported that the stock prices of firms in the highway sector reacted positively when they won transport concessions. Eroglu et al. (2016) have suggested that the stock prices of logistics firms positively react to announcements of sustainability awards. We developed our research hypotheses based on the logical reasoning that good news brings attention to a firm’s benefits from the vaccine discovery announcement and has positive consequences for a firm’s operations and improved future prospects. More coverage and information dissemination on vaccine discovery news may help investors experience less panic and change their risk perceptions. Thus, the above literature and prior studies allow us to formulate the following hypotheses:

H1: WHO’s announcement that COVID-19 was a global pandemic had a negative impact on the stock reactions of global transportation companies.

H2: The vaccine news announcement from Pfizer/BioNTech had a positive impact on the stock reactions of global transportation companies.

3. Data and methodology

We collect stock market indices and stock prices of air freight and logistics, airline, maritime, railroad, and trucking industries (GICS code: 20301010, 20303010, 20304010, 20304020, and 20302010, respectively) from Refinitiv Datastream. The initial sample comprises 781 listed transportation firms worldwide. After removing incomplete data and illiquid firms, the remaining sample includes 727 firms for this study.

The main methodology employed in this study is the event study suggested by Fama et al. (1969). This methodology is widely used in economic and finance research to investigate the impact of information arrival from a particular announcement on stock prices, which is a test of a semi-strong form of market efficiency. When information arrives at the market, stock prices incorporate it immediately. If not, investors can generate abnormal stock returns.

Starting from the estimation period, we regress market return on individual stock return to obtain coefficients, which is considered a correct estimation. Next, we obtain the abnormal return as the difference between actual stock return and estimation return from the aforementioned regression model. On the semi-strong form of market efficiency, abnormal returns are not statistically significant from zero, showing the equality of actual stock price and intrinsic stock price.

In this paper, we select two events affecting the entire world that are 1) the WHO’s declaration of a global pandemic and US President Trump’s announcement of a travel ban for 26 European countries on March 11, 2020, as representative of a negative news event, and 2) the announcement that the first vaccine had been discovered by Pfizer/BioNTech on November 9, 2020, to represent a positive news event. The ultimate aim of the present study was to examine whether abnormal returns were present around the determined event periods. The results imply time-varying behaviours of stock market participants in the global transportation industry. We began with the following market model.

$$R_{i,t}={\alpha }_i+{\beta }_i{R}_{m,t}+u_{i,t},$$ (1)

where $R_{i,t}$ and $R_{m,t}$ are daily returns of stock $i$ and daily market index returns on stock market $m$ at time $t$, respectively. $u_{i,t}$, which is independent and identically distributed, is the residual of stock i at time t.

Next, we estimate the parameters of the market model during the estimation window in 2019. The abnormal return of stock $i$ at time $t$ (${\mathit{AR}}_{i,t})$ is as follows.

$${\mathit{AR}}_{i,t}=R_{i,t}-{\widehat{\alpha }}_i-{\widehat{\beta }}_i{R}_{m,t},$$ (2)

where ${\widehat{\alpha }}_i$ and ${\widehat{\beta }}_i$ are the estimated parameters of stock i from Equation (1).

${\mathit{AR}}_{i,t}$ captures the impact of the event when the information of the two events mentioned above was announced to the markets. ${\mathit{CAR}}_{i,(t_1,t_2)}$, the accumulated abnormal return of stock i during periods t₁ and t₂, is defined as follows.

$${\mathit{CAR}}_{i,(t_1,t_2)}=\sum _{t=t_1}^{t_2}{\mathit{AR}}_{i,t}$$ (3)

We examined whether the market value deviated from the estimated value by testing if ${\mathit{CAR}}_{i,(t_1,t_2)}$ significantly differs from zero. Negative or positive ${\mathit{CAR}}_{i,(t_1,t_2)}$ implies that stock prices deviate from their estimated value during the investigated period when the market responds to new information.

We used an event window of the period ranging from five days before to five days after each event date [-5,+5]. We also use [-3,+3] and [-1,+1] as event windows for robustness tests.

4. Empirical results

Fig. 1 shows the mean CARs values for the entire sample during the [-5, +5] event window for the COVID-19 pandemic event (bold line) and vaccine event (dotted line). The pandemic event indicates that transportation stocks reported cumulative negative abnormal returns of 10.72% when WHO announced a global pandemic. At the time of the vaccine event, transportation stocks reported cumulative abnormal returns of 3.85%. Thus, the pandemic declaration event affected stock returns more than the vaccine event. Notably, during the pandemic event, which was a highly uncertain period, investors in the transportation sector were highly vulnerable to new COVID-19 information, which caused stock prices to deviate significantly from their intrinsic values.

Fig. 1.

Average cumulative abnormal returns for the entire sample.

Table 1 reports the CARs of transportation stocks in each region during the two event windows. We also report [-1,+1], [-3,+3], and [-5,+5] event windows for robustness tests. During the pandemic event, transportation stocks from all regions suffered significantly cumulative negative abnormal returns between 9.25% (Asia and Oceania) to 16.84% (Europe) for the [-5,+5] event window. During the vaccine event, Asian and European transportation firms significantly rebounded, with CARs of 3.20% and 9.17%, respectively. Transportation firms in North America and other regions showed positive but insignificant CARs. In summary, European transportation firms were hit greatly during the pandemic announcement; however, they also rallied well during the vaccine event.

Table 1.

Cumulative abnormal returns in different regions during crash and vaccine event window periods.

Regions	Window	N	Crash event (Mar 11, 2020)				Vaccine event (Nov 9, 2020)
			Mean	Median	t-test	Wilcoxon	Mean	Median	t-test	Wilcoxon
Asia and Oceania	[-1, +1]	471	−4.313%	−3.408%	−12.738***	−12.530***	0.353%	0.011%	1.067	0.711
Europe	[-1, +1]	118	−3.125%	−0.996%	−3.145***	−2.950***	5.074%	2.052%	4.517***	3.868***
North America	[-1, +1]	112	−6.269%	−3.343%	−4.130***	−4.485***	4.713%	3.842%	3.208***	4.268***
Other	[-1, +1]	26	−3.234%	−2.166%	−1.825*	−2.070**	0.745%	−0.153%	0.575	−0.444
Asia and Oceania	[-3, +3]	471	−7.103%	−5.572%	−10.021***	−9.535***	0.903%	−0.088%	1.934*	−1.174
Europe	[-3, +3]	118	−15.405%	−12.158%	−6.752***	−5.928***	6.135%	2.025%	3.872***	3.428***
North America	[-3, +3]	112	−4.220%	−3.686%	−1.042	−1.274	1.132%	0.506%	0.652	0.946
Other	[-3, +3]	26	−9.759%	−4.540%	−2.128**	−2.172**	1.950%	1.405%	1.797*	1.765*
Asia and Oceania	[-5, +5]	471	−9.254%	−8.232%	−9.877***	−9.112***	3.202%	0.741%	5.263***	4.142***
Europe	[-5, +5]	118	−16.839%	−12.698%	−6.769***	−5.893***	9.174%	4.207%	4.164***	4.027***
North America	[-5, +5]	112	−10.192%	−7.448%	−2.054**	−2.006**	1.387%	2.465%	0.554	1.582
Other	[-5, +5]	26	−11.911%	−9.840%	−2.439**	−2.552**	2.071%	0.550%	0.932	0.775

*, **, and *** indicate statistical significance at the 10%, 5%, and 1%, respectively.

Table 2 reports the CARs in different business types. Panel A shows that passenger markets were more affected than freight markets in both events. For the [-5,+5] event window, their CARs equal −17.11% and 11.69% during the pandemic and vaccine events, respectively. Cargo businesses, however, did not return positive CARs during the vaccine event. As shown in Panel B, compared with other transportation modes, airlines underwent cumulative negative abnormal stock returns of 23.97% during the pandemic, whereas railroad companies were unaffected. However, airlines were the best performers during the vaccine discovery event, with cumulative positive abnormal returns of 12.55%.

Table 2.

Cumulative abnormal returns in different business types during crash and vaccine event window periods.

Market	Window	N	Crash event (Mar 11, 2020)				Vaccine event (Nov 9, 2020)
			Mean	Median	t-test	Wilcoxon	Mean	Median	t-test	Wilcoxon
Panel A
Cargo	[-1, +1]	597	−3.926%	−3.044%	−9.810***	−11.252***	0.109%	−0.049%	0.314	−0.165
Passenger	[-1, +1]	130	−6.480%	−3.627%	−7.466***	−7.279***	9.595%	7.851%	8.621***	7.902***
Cargo	[-3, +3]	597	−7.471%	−5.266%	−7.755***	−9.416***	0.738%	−0.264%	1.486	−0.222
Passenger	[-3, +3]	130	−10.994%	−7.943%	−5.110***	−5.141***	6.819%	5.896%	4.923***	6.384***
Cargo	[-5, +5]	597	−9.335%	−7.706%	−8.100***	−9.216***	2.144%	−0.107%	3.387***	−1.860*
Passenger	[-5, +5]	130	−17.108%	−13.444%	−6.194***	−5.601***	11.693%	9.690%	5.283***	7.370***
Panel B
Air Freight & Logistics	[-1, +1]	189	−3.794%	−2.808%	−6.832***	−6.472***	−1.399%	−0.665%	−2.884***	−2.966***
Airlines	[-1, +1]	98	−7.108%	−4.579%	−7.412***	−6.724***	9.813%	8.676%	7.339***	6.518***
Marine	[-1, +1]	203	−3.258%	−3.399%	−4.164***	−6.209***	0.218%	0.087%	0.344	0.519
Railroads	[-1, +1]	50	−2.858%	−0.447%	−2.165**	−1.733*	6.181%	4.175%	4.518***	5.150***
Trucking	[-1, +1]	187	−5.178%	−3.408%	−6.837***	−6.935***	1.399%	0.082%	2.022**	1.769*
Air Freight & Logistics	[-3, +3]	189	−7.037%	−3.805%	−5.582***	−4.864***	−0.770%	−0.800%	−1.145	−1.807*
Airlines	[-3, +3]	98	−14.075%	−11.523%	−5.876***	−5.746***	6.714%	5.896%	3.820***	4.995***
Marine	[-3, +3]	203	−7.599%	−7.202%	−4.058***	−6.465***	0.756%	−0.247%	0.874	−0.263
Railroads	[-3, +3]	50	−1.778%	0.410%	−0.606	0.072	4.765%	3.094%	3.906***	4.107***
Trucking	[-3, +3]	187	−8.281%	−4.971%	−4.325***	−4.761***	2.261%	−0.145%	2.112**	−1.046
Air Freight & Logistics	[-5, +5]	189	−7.721%	−3.661%	−4.484***	−3.943***	0.747%	−0.882%	0.8	−0.488
Airlines	[-5, +5]	98	–23.965%	−20.020%	−7.797***	−6.749***	12.546%	10.830%	4.384***	6.058***
Marine	[-5, +5]	203	−10.962%	−11.078%	−5.217***	−7.067***	2.393%	0.404%	2.440**	2.586***
Railroads	[-5, +5]	50	2.727%	4.250%	0.864	2.061**	5.853%	4.289%	3.879***	4.146***
Trucking	[-5, +5]	187	−10.161%	−7.447%	−4.486***	−5.076***	3.480%	−0.107%	2.441**	−1.135

*, **, and *** indicate statistical significance at the 10%, 5%, and 1%, respectively.

Table 3 reports the CARs in developed and emerging markets. During the pandemic, transportation firms in emerging markets were hit more than those in developed markets. Both market types recovered to the same degree during the vaccine event. Table 4 reports the CARs for transportation firms in countries with low and high exposure to China. Transportation firms from countries with high exposure to China, proxied by both import and export, were less affected compared with those with lower exposure. For example, for the [-5,+5] event window, transportation firms from countries with low exposure has CARs between −15.51% and −16.05% during the pandemic event, whereas those from countries with high exposure had CARs between −9.07% and −9.35%. Nevertheless, firms from countries with high and low exposure reported significantly positive abnormal returns during the vaccine event.

Table 3.

Cumulative abnormal returns in developed and emerging markets during crash and vaccine event window periods.

Market	Window	N	Crash event (Mar 11, 2020)				Vaccine event (Nov 9, 2020)
			Mean	Median	t-test	Wilcoxon	Mean	Median	t-test	Wilcoxon
Developed markets	[-1, +1]	358	−4.418%	−2.737%	−7.286***	−8.040***	2.590%	0.788%	4.108***	4.105***
Emerging markets	[-1, +1]	369	−4.349%	−3.741%	−10.493***	−10.731***	1.043%	0.195%	2.619***	1.936*
Developed markets	[-3, +3]	358	−7.155%	−4.729%	−4.592***	−5.411***	1.307%	−0.176%	1.731*	−1.214
Emerging markets	[-3, +3]	369	−9.019%	−6.548%	−10.604***	−9.986***	2.328%	0.614%	3.805***	3.322***
Developed markets	[-5, +5]	358	−8.794%	−5.685%	−4.675***	−4.758***	3.209%	0.476%	2.947***	3.337***
Emerging markets	[-5, +5]	369	−12.598%	−9.894%	−11.902***	−10.441***	4.475%	1.394%	5.736***	4.939***

*, **, and *** indicate statistical significance at the 10%, 5%, and 1%, respectively.

Table 4.

Cumulative abnormal returns in countries with high and low exposure to China during crash and vaccine event window periods.

Market	Window	N	Crash event (Mar 11, 2020)				Vaccine event (Nov 9, 2020)
			Mean	Median	t-test	Wilcoxon	Mean	Median	t-test	Wilcoxon
Panel A
Low export exposure	[-1, +1]	289	−4.581%	−4.244%	−8.282***	−8.691***	1.502%	0.170%	2.709***	1.996**
High export exposure	[-1, +1]	377	−4.799%	−3.186%	−8.774***	−9.753***	2.303%	0.668%	4.051***	4.053***
Low export exposure	[-3, +3]	289	−13.015%	−10.148%	−10.057***	−10.034***	2.523%	0.616%	3.166***	2.377**
High export exposure	[-3, +3]	377	−6.315%	−5.572%	−4.798***	−6.511***	1.370%	0.012%	1.961*	1.59
Low export exposure	[-5, +5]	289	−16.046%	−13.979%	−10.290***	−10.075***	4.589%	0.928%	4.916***	4.052***
High export exposure	[-5, +5]	377	−9.351%	−8.872%	−5.775***	−6.539***	3.352%	0.724%	3.190***	3.458***
Panel B
Low import exposure	[-1, +1]	330	−4.830%	−3.541%	−9.311***	−9.732***	1.765%	0.210%	3.470***	2.532**
High import exposure	[-1, +1]	336	−4.582%	−3.460%	−7.818***	−8.757***	2.142%	0.673%	3.450***	3.624***
Low import exposure	[-3, +3]	330	−13.211%	−9.280%	−10.282***	−10.708***	2.589%	0.623%	3.730***	3.047***
High import exposure	[-3, +3]	336	−5.305%	−5.566%	−3.954***	−5.650***	1.165%	−0.175%	1.481	−0.847
Low import exposure	[-5, +5]	330	−15.505%	−11.427%	−10.239***	−10.348***	5.015%	1.564%	5.906***	4.986***
High import exposure	[-5, +5]	336	−9.066%	−9.638%	−5.331***	−6.158***	2.782%	0.142%	2.409**	2.444**

*, **, and *** indicate statistical significance at the 10%, 5%, and 1%, respectively.

5. Discussion and implications

5.1. Discussion on main findings and subgroups analyses

Our research was motivated by prior studies which overlooked the impact of COVID-19-related health news announcements (Salisu and Vo, 2020), especially the vaccine discovery announcement, on stock price reactions in the transportation industry (Maneenop and Kotcharin, 2020). Prior studies have also called for event study methodology to be applied more in transportation research (Gong, 2009). In addition, the event study literature in firm value is the fast-growing (Nicolau and Sharma, 2022). For the entire sample, our main findings indicate that WHO’s declaration of a global pandemic and President Trump’s announcement of a travel ban for 26 European countries on March 11, 2020, negatively affected stock returns, which is consistent with previous research (Kamal et al., 2021, Maneenop and Kotcharin, 2020, Marobhe, 2022). This suggests that investors overreacted because of their fears and concerns regarding the future uncertainty of transportation businesses. Meanwhile, the first vaccine discovery announcement by Pfizer/BioNTech positively affected the stock returns of transportation companies. This optimistic news brought investors confidence and expectations that the business would soon return to normal. However, compared with positive news, the magnitude of negative news more strongly impacts investment decisions. Moreover, the effects of COVID-19-related health news announcements on the stock returns of transportation companies across different regions, markets, subsectors, economies, and levels of exposure to China were not uniform.

To begin with regional differences, transportation firms in Europe were the poorest performers during the pandemic, which is in line with previous research (Maneenop and Kotcharin, 2020, Marobhe, 2022). The rising number of confirmed COVID-19 cases in Europe (e.g., Italy, Spain, and France) could have been the main factor that affected stock price declines. However, European transportation firms were the best performers in response to the vaccine discovery announcement. Around the date of the vaccine announcement, the daily rate of new confirmed COVID-19 cases in Europe was high (World Health Organisation, 2022), suggesting that the level of COVID-19 panic was reduced by the vaccine discovery news announcement. Investors in Europe seemed to absorb this news announcement quickly and efficiently, which led to more pronounced positive returns. This indicates that the vaccine discovery news announcement helped improve the resilience of transportation stocks, as a vaccine would help business, trade, and travel return to normal in the future. Notably, transportation stock prices in Asia–Oceania and other regions showed less positive returns. A possible explanation for this could be that investors in those regions may have been concerned about the availability of vaccines.

Notably, the stock prices of passenger companies showed greater decreases than freight companies during the pandemic event. A possible explanation for this is that the perceived health risk related to WHO’s declaration of a global pandemic created more fear and worry, which, in turn, discouraged travel. Furthermore, government interventions such as travel ban directly affect passenger markets. This is supported by Li et al., 2022, Gkiotsalitis and Cats, 2021, who reported that the number of passengers travelling dropped dramatically. The sudden falls in occupancy rates or load factors lead to revenue shocks, thus affecting firm cash flows. Additionally, passenger transportation operators could not fully operate during imposed government restrictions. Similarly, stock prices of freight operators declined following WHO’s declaration of a global pandemic outbreak. This was perceived as bad news in which investors expected that shocks related to COVID-19 would impact economic activities, cause the collapse of demand and global trade owing to country restrictions (Gavalas et al., 2022), and create transportation and supply chain disruptions (Wang et al., 2022).

Unlike freight companies, passenger transport companies immediately reacted positively to the news a vaccine had been discovered, as investors expected governments to relax their restrictive measures. Thus, the response to the COVID-19 vaccine discovery news reflects the potential economic and social benefits (e.g., removed cross-border closures) of vaccine availability. A possible explanation is that transportation firms could use their resources more efficiently, resulting in more stabilised future cash flows and reduced corporate default risk.

Based on the sectoral analyses, the stock prices of airfreight and logistics firms experienced negative returns in the same manner as other sectors. This is because several countries implemented lockdowns and stopped economic activities, such as producing, importing, and exporting goods. In particular, air cargo shipments (e.g., automotive, computer, and electronic parts) were interrupted due to transportation and supply chain disruption from COVID-19. Their negative impact translates into airfreight and logistics company performance, reflected by declines in their stock prices. Unlike airline companies, airfreight and logistics companies experienced slightly negative returns on the vaccine discovery announcement date compared with before this date. One possible reason for this could be that air freight cargo capacity remained constrained. Investors may not have expected airfreight supply chains to recover fully. Meanwhile, airlines experienced the largest negative impact from WHO’s pandemic declaration and the US-implemented travel ban for 26 European countries. In contrast, airline companies showed the greatest positive reaction, compared with other firms, to the vaccine discovery news announcement. Positive investor sentiment was improved by the vaccine discovery news announcement because investors expected restrictions to be eased soon, allowing for more traffic.

For the maritime stocks, the magnitude effect of WHO’s declaration of a pandemic was the second largest stock price decline. This is in line with Kamal et al. (2021). Relevant evidence suggests that freight rates (e.g., dry bulk and tanker) enormously declined (Michail and Melas, 2020), causing revenue shock. Interestingly, unlike the airline sector, the maritime sector did not immediately realise the impact of the vaccine discovery announcement on their stock prices. However, the positive abnormal returns showed gradual increases by the + 5 trading day estimation window. This may imply that investors require some time to ensure the vaccine's effectiveness, which aligns with Kamal et al. (2021). In short, the announcement regarding the approval of Pfizer/BioNTech’s vaccine increased investor confidence regarding the future containment of COVID-19.

Although several countries suspended passenger rail service early in the pandemic, rail freight companies remained key providers of necessary goods, including medical supplies, during the crisis. Therefore, the stock prices of rail companies were unaffected. According to [-1, +1] trading day, stock prices declined the least for rail companies, compared with other sectors. Stock returns were positive for both events based on [-5, +5] trading days. This indicates that the railroad business rebounded quickly, consistent with Schofer et al. (2022), who observed that demand for rail freight transportation rapidly rebounded.

Similar to other sectors, stock prices in the trucking sector experienced negative returns during the pandemic declaration event. The reasons for this are similar to those of other sectors, such as supply chain disruptions, demand declines, and restrictive government policies in response to the pandemic. With a lack of adequate government supports, trucking companies are vulnerable to the health and economic risks of COVID-19 (Sperry et al., 2022). Following the vaccine discovery announcement date, stock prices in the trucking sector reacted with slightly positive returns. However, the returns continued to increase following the post-event announcement. Investors may have gradually realised and felt more confidence in vaccine discovery as a trigger to re-start the economy.

Although emerging markets have fast economic growth, we assume that emerging and developed countries have different economic sizes and levels of financial integration. The COVID-19 pandemic declaration event may have weakened future transportation business in emerging countries more than it did for developed economies. Transportation firms in emerging markets were more affected by WHO’s declaration of the COVID-19 pandemic than were developed markets. More stock price declines in emerging markets may result from inadequate health infrastructure and greater difficulties in implementing such policies owing to weak institutional and legal settings (Guven et al., 2022). Alternatively, Guven et al. (2022) added that firms in developed markets implemented a superior hedge than those in emerging markets. Moreover, developed countries may have been better positioned to provide bailouts or grants for businesses to continue their operations. Thus, government support measures reflect how stocks perform during a crisis.

Moreover, we assumed that transportation firms that engaged more with China for trade would be more vulnerable when WHO announced the global pandemic. Surprisingly, transportation firms with less exposure with China were doubly adversely impacted by WHO’s declaration of a worldwide pandemic, while transportation firms with higher exposure to China were less affected in comparison during both events. This indicates that transportation firms with high exposure to China were more resilient to the pandemic. This is consistent with the notion that China is the world’s factory or the centre of the global supply chain for most manufactured goods (Cullinane and Haralambides, 2021, Vidya and Prabheesh, 2020). Additionally, the pandemic did not radically change China’s trade network position. Moreover, investors expected strong and prompt Chinese government interventions to facilitate an effective return to normality more than in other countries (Millefiori et al., 2021). In contrast, transportation firms with low and high exposure to China positively reacted to the first vaccine discovery announcement by Pfizer/BioNTech. Notably, the abnormal returns of transportation firms with low exposure to China grew increasingly larger over the post-announcement. Investors may have gradually realised the vaccine's benefits and absorbed the information. Alternatively, investors may have reassessed the fundamental of transportation firms, such as earnings, and changed their investment strategies to invest more in transportation sectors in such countries.

5.2. Research implications

Our study provides several contributions for both academics and practitioners. First, it adds to the literature regarding the impact of COVID-19-related health news announcements on firms’ stock price reactions in a specific industry. While there is a growing body of academic literature on the adverse effects of COVID-19, our study provides both negative and positive impacts of COVID-19-related health news announcements and insightful findings on multiple-group analyses. Such results bring provide discussion on research implications.

First, firms may invest more resources into recovery capacities to build resilience. We also agree with other scholars who suggest that firm managers may implement some hedging techniques to minimise loss (Gavalas et al., 2022), establish an appropriate cash holding policy during revenue shocks (Kotcharin and Maneenop, 2020a) and adjust their capital structure against high uncertainty (Kotcharin and Maneenop, 2020b). In addition, pre-COVID-19 firm characteristics should receive attention because they can build corporate immunity against the COVID-19 pandemic (Ding et al., 2021). Firm managers also can adopt a framework of firm responses to the crisis proposed by Amankwah-Amoah, 2020. Regarding risk management and firm valuation (Hong et al. (2021), the COVID-19 pandemic shock directly impacts firm’s cash flows via three channels, namely, negative firms’ cash flows, decreased productivity due to inflected COVID-19 workers, and increased risk premiums. Firm and government should work together to build trust from traveler regarding to health risk perception. This is because trust, effective communication and a clear quarantine time limit are associated with travel decisions (Yang et al., 2021a, Garaus and Hudáková, 2022), subsequently, it potentially contributes to expected future earnings. When firms introduce safety measures, they benefit passengers and protect workers from infected COVID- 19. This helps to maintain firm productivity. Similarly, the government's response to COVID-19 reduces the risk of being infected while passengers travel. If government intervention lower the disease spread, expected future earnings of firms would be increased, leading to positive returns (Hong et al., 2021, Martins and Cro, 2022). Furthermore, firm managers may want to reconsider their global transport network if similar pandemics occur. In summary, firm managers should be more prepared and invest more resources in timely and adequate responses to current and future disruptions to gain confidence from market participants. Our study additionally builds awareness of how health information news plays a role in notifying market participants of the risk and uncertainties triggered by an unprecedented pandemic and the negative impact on firm operations.

Second, building investor confidence is crucial for transportation firms to access external funding and favourable credit. Investors may use our findings to make decisions to invest for better returns and manage their investment portfolios. The COVID-19-related health new events changed the future economic environment, which influences portfolio restructuring. In addition, adverse news events may lead to changes in cash flow expectations for transportation firms, resulting in portfolio reallocations. Investors allocate their money to sectors such as the airline sector that are massively impacted because they expect business to return to normal. This indicates that investors are influenced by behavioural and psychological factors, supporting Kaplanski and Levey (2010). However, investors should follow vaccination progress because it vital for returning businesses to normal.

Third, policymakers should deploy direct and indirect support measures (e.g., a moratorium on tax and interests) to stabilise firm cash flows. Government interventions can raise stock market returns (Kotcharin et al., 2022). Moreover, governments should collaborate to alleviate the negative impact of supply chain disruption. For example, using electronic connectivity and electronic documents to speed up transit and cargo flows across borders could help increase the comparative advantages of railway freight transport companies (ESCAP, 2020). Finally, policy-makers, especially those in emerging markets, should use appropriate policies to stabilise economic and financial systems. Accumulative policies for the transportation industry for future health disasters to boost firm financial resilience and the policy-induced ability of transportation companies to recover from adverse exogenous shocks and restore user confidence should be promoted. Finally, firm managers can utilise our findings when they plan their financial and operating policies against stock price reactions to the next “black swan” event.

6. Conclusions

The purpose of this study was to empirically examine the impact of COVID-19-related health news announcements on stock price reactions of listed transportation firms worldwide by employing event study methodology. The results indicate that transportation firm stock prices were negatively affected by the pandemic declaration event. However, the effects were not uniform across the different analysed subgroups. The pandemic news event greatly affected passenger transportation, particularly in the airline sector. Moreover, listed transportation firms in Europe were the most severely impacted by the WHO’s announcement of the COVID-19 global pandemic and the US ban on European travellers on March 11, 2020. Transportation firms in emerging countries and those with low exposure to China were more strongly impacted than those in developed countries and those with high exposure to China. In short, investors made their investment decisions based on risk perceptions and the severity of the pandemic’s impact on the global economy. Meanwhile, the vaccine news event positively affected stock prices as investors expected that a vaccine would help the economy and transportation business recover soon. In addition, the vaccine discovery announcement conveyed an optimistic view of firms’ operating status and future earnings expectations. Transportation firms in Europe were the winners, as their stock prices surged the highest in response to the vaccine discovery news. In particular, the stock prices of passenger transportation sectors, such as the airline sector, reflected a strongly positive reaction. Investors’ anxiety and panic were reduced following the vaccine discovery announcement, which drove transportation stocks to soar based on optimism.

The findings contribute to the literature investigating the relationship between COVID-19 and transportation firms. Market participants should understand how stock price reactions differed in response to two unique, important announcements in the event of a future crisis. Supportive government policies are urgently needed to build investor confidence in the transportation industry and assist firms in increasing their ability to recover in timely manner. During a crisis, government response policies are crucial to diminish the negative impact. In addition, supportive government measures may encourage and assist firms in practicing environmental, social, and governance which researchers reported protected the value of major US airline firms during the COVID-19 pandemic (Chen et al., 2022). Moreover, close collaboration between governments could help to mitigate supply chain disruptions. For instance, governments may revise their border policies, such as easing containment measures, to facilitate the flow of goods and services. Furthermore, governments may use more electronic channels, digitalisation, and automation for effective and efficient transport connectivity. Therefore, effective government response policies have implications for transportation firms’ financial performance. This study used stock price as a corporate indicator of future business. Finally, firm managers can refer to our findings when they plan and implement risk management to mitigate adverse effects on shareholder wealth.

Future research may focus on announcements of government support measures and shareholder wealth during times such as the COVID-19 pandemic. Researchers may focus on China’s travel restrictions or the reopening of travel in East Asia. Corporate governance during a crisis is a growing area of research interest as it relates to shareholder benefits and helps to improve firm performance. The relationships between firm-specific conditions, such as environmental, social, and governance, and firm value in the face of COVID-19 are potential directions for future research.

Declaration of Competing Interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Data availability

No data was used for the research described in the article.