The effect of investor protection on firm riskiness and performance during the COVID-19 economic crisis

ABSTRACT

This paper examines whether differences in the quality of investor protection between countries affect firm riskiness and firm performance during the COVID-19 economic downturn. Using a large cross-country dataset and a broad variety of controls measured at the state and firm level, we find that jurisdictions that offer stronger investor protection experience significantly lower volatility and better performance during the pandemic. This effect is amplified in countries strongly affected by COVID-19. Our results contribute to the ongoing debate in the finance literature about the impact of the quality of investor protection on corporate behaviour and performance.