Production Networks, Working from Home, and Firm Resilience to the COVID-19 Pandemic

The COVID-19 pandemic has disrupted global trade and production. It has affected firms' operations directly and indirectly through their production networks. To cope with the crisis, many firms have allowed their employees to work from home. This study examines whether firms more exposed to the pandemic perform worse than those less exposed and whether the existence of more opportunities to work from home increases firm resilience. We construct a buyer-seller network of listed Chinese firms and collect job postings from a leading online platform providing hiring services in China. We estimate the impact of COVID-19 shocks by exploring the variation across these firms based on their location, buyer-seller network, and the spatial and temporal evolution of the pandemic. We find COVID-19 shocks had significant negative effects on firm-level outcomes, including abnormal returns, sales, and job postings, both directly and indirectly through production networks. Nevertheless, the impact is smaller on firms with more workers who can work from home. Our study enhances our understanding of shock transmission across production networks and working from home as a source of firm resilience