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Limited state support and constrained finances make the developing world more vulnerable to the economic fallout of the coronavirus pandemic. Yet, many firms in emerging economies chose a human-centric approach over self-serving means to cut costs, finds a new study published by VoxEU.

Based on a survey across 10 emerging markets, the study finds that most firms reacted to the pandemic by cutting down on investments rather than by laying off employees. Some cut down on executive salaries, and many refrained from cutting employee benefits, the paper finds.

Researchers Thorsten Beck and others surveyed nearly 500 listed firms in April and June, and also studied financial statements to gauge reactions to the pandemic. Companies from Bangladesh, Indonesia, Malaysia, Pakistan, the Philippines, Saudi Arabia, South Africa, Thailand, Turkey and Vietnam were covered in the survey.

Results from the survey show that around three-fourths of the firms reported a negative impact of the pandemic. Firms in the Philippines and Bangladesh were the most affected, with 89% facing negative effects. The real estate and the non-essential consumer goods sectors were hit the worst.

However, the study finds that to a large extent, companies received cooperation from employees and stakeholders. The study reports efforts towards protecting labour, addressing short-term needs of stakeholders and maintaining long-term relationships. Many firms also contributed to the fight against the pandemic through donations, the study finds.

The researchers find less negative impact on the stock prices of companies that cared about their stakeholders’ interests during the pandemic. This shows that the financial markets valued such firms more, the researchers say.

The authors also find that companies were fast to react to the outbreak and take stakeholder-centric steps, even before their governments.

Also read: COVID-19 in emerging markets: Firm-survey evidence

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