The stock price reaction of the COVID-19 pandemic on the airline, hotel, and tourism industries

David Carter; Sharif Mazumder; Betty Simkins; Eric Sisneros

doi:10.1016/j.frl.2021.102047

The stock price reaction of the COVID-19 pandemic on the airline, hotel, and tourism industries

Financ Res Lett. 2022 Jan:44:102047. doi: 10.1016/j.frl.2021.102047. Epub 2021 Apr 6.

Authors

David Carter¹, Sharif Mazumder^{1

2}, Betty Simkins¹, Eric Sisneros¹

Affiliations

¹ Department of Finance, Spears School of Business, Oklahoma State University, Stillwater, OK 74078, USA.
² Haile/US Bank College of Business, Northern Kentucky University, Highland Heights, KY, 41099, USA.

Abstract

This paper investigates the stock market performance from the second half of February through the latter portion of March 2020 for U.S. travel-related firms (airlines, restaurants, and hotels) in response to the COVID-19 pandemic. Clearly the reduction in travel was negative news for the travel industry; however, we focus on the factors used by market participants to price the information into stock prices. We find that larger firms with greater cash reserves and higher market-to-book ratios experienced less negative returns, while firms with greater leverage were penalized more. Additionally, we find that cash reserves were particularly important for hotels.

Keywords: COVID-19; Event study; Market reaction; Multi-variate regression model.