The impact of financial aid on firm value and stock market performance during the COVID-19 pandemic

Abstract

The COVID-19 pandemic had a profound impact on the economy, with some sectors suffering significant setbacks while others demonstrated resilience. This comprehensive dissertation analyzes the pandemic's effects on sectors, countries, investor expectations, financial support intensity, company characteristics, and stock market performance.Certain sectors, such as transportation, lodging, travel, and entertainment, experienced severe negative impacts that persisted even two years after the pandemic, resulting in declining cumulative risk-adjusted returns. Conversely, financially resilient sectors like F&B sales, electronics, and pharmaceuticals performed exceptionally well, generating cumulative risk-adjusted returns ranging from 40% to 50%.Stock price reactions to resilience varied across countries. In Germany, investors responded negatively to aid announcements for more resilient companies, whereas in Greece, the reaction was positive. Except for specific countries' market value of equity and book-to-market ratio, firm-level variables had minimal impact on cumulative returns.Financial aid varied according to company characteristics. Smaller companies received more aid, while value-oriented companies received less aid compared to growth companies. Aid intensity affected profitability, cash balance, and debt. Aided firms recorded positive returns within 10-22 days of the aid announcement.The impact of financial support varied at different stages of the pandemic. Initially, higher intensity and equity support were associated with lower cumulative returns, reflecting investor pessimism. However, as the pandemic progressed, this effect reversed, suggesting an increasing recognition of the value of financial support under acute market conditions.Disclaimer: AI (Chatgpt) was used for word shortness and correctness under supervision of my advisor. Prompt conversation is available upon request.

Date of Award	5 Jul 2023
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Reis (Supervisor)