Corporate Dividend Policies during the COVID-19 Pandemic

In this paper, we examine the changes in corporate dividend policies during the COVID-19 shock. For empirical analysis, we employ annual data of 360 companies from the Pakistan Stock Exchange over the period 2015–2020. Using descriptive analysis and Logit regression models, we find that firms were more likely to either omit or reduce dividend payments during the pandemic year of 2020 as compared to the trends in pre-COVID-19 years of 2015–2019. Further, firms with higher profitability, asset turnover and size were less likely to opt for dividend omissions. On the contrary, dividend omissions were more likely among firms with higher debt ratios. The findings of this study helps to understand firm dividend policies during crisis periods.

The impact of social cohesion on stock market resilience: Evidence from COVID-19

We investigate whether cultural tightness, the strength of social norms, provides stock markets with resilience to external shocks. There is tension in forming expectations regarding this. One reasoning, particularly following from cultural archaeology literature, is that societies best cope with challenges, disaster recovery, and loss when they are culturally comfortable with transformation, with cultural tightness arguably opposed to cultural change. On the other hand, alternative reasoning is that tightness allows for societal cohesion that supports optimism to function in a unified way to confront challenge. We test whether markets were supported by cultural tightness during COVID-19 adversity. In accordance with the latter view, we evidence that stock market volatilities during COVID-19 were significantly lower in countries with ‘tighter’ cultures.

The performance of Islamic versus conventional stocks during the COVID-19 shock: Evidence from firm-level data.

In this study, we extend the recently heated debate that compares the performance of Shariah compliant equities with their non-Shariah compliant counterparts especially during the Covid-19 shock. Unlike the existing literature, which uses stock market index level data to reach controversial conclusions, we use firm-level stock returns data to find robust evidence that Shariah compliant stocks outperformed their conventional counterparts during the Covid-19 market meltdown. More specifically, we find that the prices of Shariah compliant stocks reacted to the increase in Coronavirus confirmed cases and government social distancing measures with lower negative returns than the prices of non-Shariah compliant stocks. Overall, our findings imply that Shariah compliant stocks fared better during the Covid-19 crisis episode.

COVID-19 social distancing measures and economic growth: Distinguishing short- and long-term effects.

Social distancing policies have been criticized for their adverse effect on economies. However, we evidence that while they have a short-run adverse effect, they also have a long-run recovery effect on economic growth. Utilizing quarterly gross domestic product (GDP) growth rate data from OECD member states, we find that the medium-term recovery effect of stringent social distancing policies on economic growth is three times higher the short-term adverse effect. We additionally investigate social distancing measures with sub-components of GDP, as well as the conditioning roles of institutional factors.

Are Investors’ Attention and Uncertainty Aversion the Risk Factors for Stock Markets? International Evidence from the Covid-19 Crisis

In this paper, we examine the impact of investors’attention to Covid-19 on stock market returns and the moderating effect of national culture on this relationship. Using daily data from 34 countries over the period January 23 to June 12, 2020, and measuring investors’attention with the Google search volume (GSV) of the word “coronavirus”for each country, we find that investors’enhanced attention to the Covid-19 pandemic results in negative stock market returns. Further, measuring the national culture with the uncertainty avoidance index (the aspect of national culture which measures the cross-country differences in decision-making under stress and ambiguity), we find that the negative impact of investors’attention on stock market returns is stronger in countries where investors possess higher uncertainty avoidance cultural values. Our findings imply that uncertainty avoidance cultural values of investors promote financial market instability amid the crisis.

Stock markets' reaction to Covid-19: Moderating role of national culture.

Recent literature reports stock markets around the world reacted to the Covid-19 pandemic with negative returns. However, this reaction was not uniform across countries. In this paper, we postulate that the national-level uncertainty avoidance, which determines how sensitive members of a nation are to uncertainty, moderates the stock markets' reaction to the pandemic. Using daily data of Covid-19 confirmed cases and stock market returns from 43 countries, we find robust evidence that the decline in stock market returns in response to one percent increase in growth in confirmed cases is stronger for the countries with higher national-level uncertainty aversion.

Economic impact of government interventions during the COVID-19 pandemic: International evidence from financial markets.

The outbreak of COVID-19 pandemic came as a rare, unprecedented event and governments around the globe scrambled with emergency actions including social distancing measures, public awareness programs, testing and quarantining policies, and income support packages. In this paper, we examine the expected economic impact of government actions by analyzing the effect of such actions on stock market returns. Using daily data from January 22 to April 17, 2020 from 77 countries, we find announcements of government social distancing measures have a direct negative effect on stock market returns due to their adverse effect on economic activity, while an indirect positive effect through the reduction in COVID-19 confirmed cases. Government announcements regarding public awareness programs, testing and quarantining policies, and income support packages largely result in positive market returns. Our findings have important policy implications, primarily by showing that government social distancing measures have both positive and negative economic impact.

Stock markets' reaction to COVID-19: Cases or fatalities?

In this paper, we examine the stock markets' response to the COVID-19 pandemic. Using daily COVID-19 confirmed cases and deaths and stock market returns data from 64 countries over the period January 22, 2020 to April 17, 2020, we find that stock markets responded negatively to the growth in COVID-19 confirmed cases. That is, stock market returns declined as the number of confirmed cases increased. We further find that stock markets reacted more proactively to the growth in number of confirmed cases as compared to the growth in number of deaths. Our analysis also suggests negative market reaction was strong during early days of confirmed cases and then between 40 and 60 days after the initial confirmed cases. Overall, our results suggest that stock markets quickly respond to COVID-19 pandemic and this response varies over time depending on the stage of outbreak.