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

Quang Thi Thieu Nguyen (Faculty of Banking, University of Economics, The University of Danang, Danang, Vietnam)
Dao Le Trang Anh (School of Banking and Finance, National Economics University, Hanoi, Vietnam) (Lincoln University, Christchurch, New Zealand)
Christopher Gan (Lincoln University, Christchurch, New Zealand)

China Finance Review International

ISSN: 2044-1398

Article publication date: 8 July 2021

Issue publication date: 2 August 2021

872

Abstract

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.

Keywords

Citation

Nguyen, Q.T.T., Anh, D.L.T. and Gan, C. (2021), "Epidemics and Chinese firms' stock returns: is COVID-19 different?", China Finance Review International, Vol. 11 No. 3, pp. 302-321. https://doi.org/10.1108/CFRI-03-2021-0053

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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