Essays on Corporate Resilience and Risk Pricing During the COVID-19 Pandemic

The Covid-19 pandemic, initially a global health crisis, rapidly evolved into a full-scale economic shock, deeply impacting firms, financial markets, and policymaking. This thesis explores how firms responded to the pandemic across three dimensions: firm-level resilience, intertemporal market responses across multiple waves, and the pricing of firm-specific Covid and political risk. This study uses the US, UK, China, Brazil, India, France, Germany, and Italy as our sample countries as these countries were seriously affected by Covid in terms of death rate. This thesis uses relevant methods like OLS, fixed effects, quintile regressions. To address endogeneity, I also use general method of moments (GMM) and two stage least squares (2SLS). By combining cross-country and firm-level data, the thesis provides a comprehensive analysis of the heterogeneity in firm performance and risk pricing during the pandemic. Empirical chapter one investigates whether firm characteristics measured prior to the pandemic can explain variations in firm performance during the first wave of COVID-19. The analysis reveals that firm size, cash holdings, capital expenditure, executive compensation, risk, and ownership concentration significantly predict stock returns during the crisis. Empirical chapter two examines whether investors and firms learned from earlier waves of COVID-19 or whether firm performance was driven by persistent, underlying business models. This chapter tests two competing hypotheses—the learning hypothesis and the business model hypothesis. The findings lend greater support to the latter: performance in one wave is positively correlated with performance in subsequent waves, particularly for the second, third, and fourth waves. Empirical chapter three explores whether firm-level COVID risk and political risk were priced in financial markets during the pandemic. The study finds that both types of risk are significantly and positively related to stock returns, particularly in 2020 when the crisis was most acute. This suggests investors required a risk premium to hold stocks exposed to higher COVID and political uncertainty.