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System Relevance and Firm Performance Due to COVID-19

Author

Listed:
  • Böhm, Michael Johannes

    (TU Dortmund)

  • Qendrai, Pamela

    (IZA)

Abstract

We study the impact of COVID-19 on firm performance. Using financial accounts of a large number of German firms, we document that industry affiliation is an important economic dimension of the crisis. Motivated by this fact, we analyze an important industry-specific regulation, system relevance, which allows businesses to remain open in times of lockdown and other restrictions. A difference-in-differences estimation strategy shows that relative revenues of system-relevant firms increase by 6-9 percent and profits by 17-25 percent due to COVID. Controlling for channels that are arguably not driven by the system-relevance regulation, the impact on revenues decreases but remains significant. Overall, results indicate that regulations affecting the ability to operate as well as industry-level shocks play important roles for firm performance during a pandemic-induced crisis.

Suggested Citation

  • Böhm, Michael Johannes & Qendrai, Pamela, 2023. "System Relevance and Firm Performance Due to COVID-19," IZA Discussion Papers 16606, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16606
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    More about this item

    Keywords

    system relevance; industry shocks; firm performance; COVID-19;
    All these keywords.

    JEL classification:

    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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