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Equity market responses to surprise Covid-19 lockdowns: The role of pandemic-driven uncertainty

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  • Mathur, Aakriti
  • Sengupta, Rajeswari
  • Pratap, Bhanu

Abstract

The onset of the Covid-19 pandemic raised questions about identifying and measuring vulnerabilities in non-financial firms in response to large shocks. Applying natural language processing on quarterly earnings call reports, we construct a firm-specific measure of concern about the pandemic for a set of Indian non-financial firms. Compared to their peers, firms with early concern about the pandemic had worse equity responses after the announcement of a surprise, nationwide lockdown in March 2020. We extract the context of the pandemic-related discussions to disentangle the possible mechanisms. The differential returns can only be explained by higher information uncertainty about the impact of the pandemic and its implications for future cash flows.

Suggested Citation

  • Mathur, Aakriti & Sengupta, Rajeswari & Pratap, Bhanu, 2024. "Equity market responses to surprise Covid-19 lockdowns: The role of pandemic-driven uncertainty," Journal of Asian Economics, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:asieco:v:91:y:2024:i:c:s1049007823001112
    DOI: 10.1016/j.asieco.2023.101691
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    More about this item

    Keywords

    Covid-19; Event study; Earnings calls; Firm performance; Uncertainty; Central bank policies;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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