Firm efficiency and stock returns during the COVID-19 crisis

Daniel Neukirchen; Nils Engelhardt; Miguel Krause; Peter N Posch

doi:10.1016/j.frl.2021.102037

Firm efficiency and stock returns during the COVID-19 crisis

Financ Res Lett. 2022 Jan:44:102037. doi: 10.1016/j.frl.2021.102037. Epub 2021 Mar 31.

Authors

Daniel Neukirchen¹, Nils Engelhardt¹, Miguel Krause¹, Peter N Posch¹

Affiliation

¹ TU Dortmund University, Faculty of Business and Economics, Chair of Finance, Otto-Hahn-Str. 6, Dortmund 44227, Germany.

Abstract

We investigate the relationship between firm efficiency and stock returns during the COVID-19 pandemic. We find that highly efficient firms experienced at least 9.44 percentage points higher cumulative returns during the market collapse. A long-short portfolio consisting of efficient and inefficient firms would have also yielded a significantly positive weekly return of 3.53% on average. Overall, our results show that firm efficiency has significant explanatory power for stock returns during the crisis period.

Keywords: COVID-19; Firm efficiency; Resiliency.