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COVID-19 impact on firm investment—Evidence from Chinese publicly listed firms

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  • Jiang, Jie
  • Hou, Jack
  • Wang, Cangyu
  • Liu, HaiYue

Abstract

The COVID-19 outbreak had a significant impact on business cash flows and investment activities. This paper examined the COVID-19 impact on Chinese business investment in 3326 A-share listed quarterly financial reports, from which it was found that the negative relationship was more pronounced in the large, eastern Chinese state-owned firms. Using a propensity score matching method and difference-in-differences estimation, corporate financial flexibility was also examined, with the results indicating that high cash flexibility provided a buffer that allowed firms to better deal with adverse external shocks as the firms that had high cash flexibility were able to significantly increase their investments after the COVID-19 outbreak. Various robustness tests were conducted, all of which verified the robustness of the results. Overall, the empirical results provided evidence that the COVID-19 pandemic in China had a negative impact on Chinese listed firms, and verified the vital role of flexible financial reserves for firm survival and development during crises.

Suggested Citation

  • Jiang, Jie & Hou, Jack & Wang, Cangyu & Liu, HaiYue, 2021. "COVID-19 impact on firm investment—Evidence from Chinese publicly listed firms," Journal of Asian Economics, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:asieco:v:75:y:2021:i:c:s104900782100049x
    DOI: 10.1016/j.asieco.2021.101320
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