The long shadow beyond lockdown: Board chairs’ professional pandemic experiences and corporate investments

This study performs empirical tests to show several behavioral patterns in managerial decision-making using Chinese data. Based on the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, caused by the same family of viruses as COVID-19, we show that firms with board chairs that experienced SARS during their tenure as senior executives invested less in subsequent periods. This effect is evident for board chairs that personally experienced the pandemic and those who prominently perceived their neighbor's operating distress during the SARS outbreak. The impact persists and is amplified by other negative shocks, such as infectious diseases and economic uncertainty, which supports the validity of stimulus generalization theory in corporate finance. Firms with board chairs that experienced SARS invested even less during the COVID-19 pandemic but performed relatively better during this same period than during normal business operations. However, the benefit was somewhat smaller than the overall loss. This study supports the finding that the long-lasting impact of pandemic-induced operating distress can distort the real economy. Our findings have meaningful implications for assessing the long-term economic effects of COVID-19.