COVID-19, Firm Exposure, and Firm Value : A Tale of Two Lockdowns

We examine the stock market responses to two symbolic events in the outbreak of COVID-19: (1) the lockdown of Hubei province; and (2) the containment of the disease in China and its spread to overseas. Overall, market in China responded negatively (positively) to the first (second) event. Regression analysis reveals that, following the first event, firms with Hubei exposures earned significantly lower returns while those with foreign exposures earned significantly higher returns. Foreign exposures, however, had significantly negative effects on returns following the second event. The valuation effects of Hubei and foreign exposures also vary across firm ownership and industries