BackHow worried are firms about coronavirus?
A study by the Institute of New Economic Thinking uses transcripts of quarterly earnings conference calls of 11,000 public listed firms across 84 countries to measure each firm’s exposure to covid-19 and to extract information about their biggest concerns
PremiumCompanies across the world are facing an unprecedented challenge presented by the covid-19 crisis even if they are not all equally exposed to the risks.
A study by the Institute of New Economic Thinking uses transcripts of quarterly earnings conference calls of 11,000 public listed firms across 84 countries to measure each firm’s exposure to covid-19 and to extract information about their biggest concerns.
The study authored by Tarek A. Hassan of Boston University and others finds that China has the highest exposure till date, with over 80% of earnings calls mentioning covid-19. But Chinese companies seem to have reached their peak in terms of the frequency of covid-19-related discussions in late February. The frequency of such discussions in their earning calls is now trending downward, the authors find. After China, Singapore and Germany seem the most concerned. Surprisingly, companies in countries such as South Korea and Italy appear less worried, going by their call transcripts.
The authors find that most companies are concerned about decreasing demand and disruption of the supply chain. In the last three months, concerns related to firms’ supply chain almost tripled from 12.12% to 32.84% of snippets mentioning the virus.
Here a “snippet" refers to text blocks containing the word “covid-19" or any of its synonyms. By contrast, fewer firms voiced concerns about their financing position. About 14% of the firms in the analysis have so far not experienced any impact on their operations.
About 8%, particularly those with businesses in anti-viral medication and testing equipment, are expecting to gain from these disruptions. Interestingly, the authors also find that firms that have experience of dealing with SARS- or H1N1-induced disruptions have more positive expectations about their ability to deal with covid-19. However, since these outbreaks were of a much smaller magnitude, these firms may be overestimating their preparedness.
Also read: Firm-Level Exposure to Epidemic Diseases: Covid-19, SARS, and H1N1
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