Epidemics and Chinese firms' stock returns: is COVID-19 different?

Purpose - This study investigates the Chinese stocks' returns during different epidemic periods to assess their effects on firms' market performance. Design/methodology/approach - The study employs an event study method on more than 3,000 firms listed on Shanghai and Shenzhen stock exchanges during periods of SARS, H5N1, H7N9 and COVID-19 Findings - Epidemics' effect on firms' stock returns is persistent up to 10 days after the event dates. Although the impact varies with types and development of the disease, most firms experience a negative impact of the epidemics. Among the epidemics, COVID-19 has the greatest impact, especially when it grows into a pandemic. The epidemics' impact is uneven across industries. In addition, B-shares and stocks listed on Shanghai Stock Exchange are more negatively influenced by the epidemic than A-shares and those listed on Shenzhen Stock Exchange. Research limitations/implications - The results of the study contribute to the limited literature on the effects of disease outbreaks as an economic shock on firm market performance. Given the possibility of other epidemics in the future, the study provides guidance for investors in designing an appropriate investing strategy to cope with the epidemic shocks to the market. Originality/value - The research is novel in the way it compares and assesses the economic impact of different epidemics on firms and considers their impact at different development stages.