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Heterogeneous Market Reactions to Pandemic Announcements: Evidence from China

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  • Qingfeng Cai
  • Dongxu Li
  • Shijie Wang

Abstract

This study finds that market reactions are overall positive to World Health Organization (WHO)’s announcing COVID-19 a pandemic. The effect is greater among firms with more financial flexibility. We found the positive market reactions are explained by market expectation of government emergency interventions. Market reactions are more positive in regions with a more supportive government and with higher density of state-owned banks. Results imply that government interventions relieve the financial constraints of the private sector through credit lending. Finally, in the first quarter of 2020, only financially flexible firms are able to increase cash holdings.

Suggested Citation

  • Qingfeng Cai & Dongxu Li & Shijie Wang, 2023. "Heterogeneous Market Reactions to Pandemic Announcements: Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(15), pages 4075-4087, December.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:15:p:4075-4087
    DOI: 10.1080/1540496X.2023.2172316
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