As the 2019 novel coronavirus disease (COVID-19) pandemic rages globally, its impact has been felt in the stock markets around the world. Amidst the gloomy economic outlook, certain sectors seem to have survived better than others. This paper aims to investigate the sectors that have performed better even as market sentiment is affected by the pandemic. The daily closing stock prices of a total usable sample of 1,567 firms from 37 sectors are first analyzed using a combination of hierarchical clustering and shape-based distance (SBD) measures. Market sentiment is modeled from Google Trends on the COVID-19 pandemic. This is then analyzed against the time series of daily closing stock prices using augmented vector autoregression (VAR). The empirical results indicate that market sentiment towards the pandemic has significant effects on the stock prices of the sectors. Particularly, the stock price performance across sectors is differentiated by the level of the digital transformation of sectors, with those that are most digitally transformed, showing resilience towards negative market sentiment on the pandemic. This study contributes to the existing literature by incorporating search trends to analyze market sentiment, and by showing that digital transformation moderated the stock market resilience of firms against concern over the COVID-19 outbreak.
The COVID-19 outbreak is a global crisis that has placed small and medium enterprises (SMEs) under huge pressure to survive, requiring them to respond effectively to the crisis. SMEs have adopted various digital technologies to cope with this crisis. Using a data set from a survey with 518 Chinese SMEs, the study examines the relationship between SMEs’ digitalization and their public crisis responses. The empirical results show that digitalization has enabled SMEs to respond effectively to the public crisis by making use of their dynamic capabilities. In addition, digitalization can help improve SMEs’ performance. We propose a theoretical framework of digitalization and crisis responses for SMEs and present three avenues for future research.
The research uses the development of 2019 novel coronavirus disease (COVID-19) in the human body as an example to explore the microstructures and dynamic processes of a concise complex system from the lens of the five-phase system. Based on the structural balance theory and system dynamics, the research finds that transitive triads and cyclic triads in the fivephase system are both imbalanced. The integration of these differentiated triads comprises of a balanced intermediate form in the shape of quadrangular cycles. These cycles serve as microstructures of the five-phase system, due to the inherent balancing feedback mechanism, and support the generation of resultants. The alternation of quadrangular cycles drives the spiraling development of the whole system. By orderly and regular interweaving of signed directed links, the research provides a holistic, process-oriented demonstration for the development processes of COVID-19. It clarifies that the essence of the five-phase system is phase-transition processes with the quadrangular cycle as carrier and supporter, rather than the static aggregation of five elements. The research deepens the understanding of system nonlinearity by visualizing the circular causality and promotes the academic dialogue between the Western process theory and the Chinese inherited notion of the fivephase system.
We develop a recession forecasting framework using a less restrictive target variable and more flexible and inclusive specification than those used in the literature. The target variable captures the occurrence of a recession within a given future period rather than at a specific future point in time (widely used in the literature). The modeling specification combines an autoregressive Logit model capturing the autocorrelation of business cycles, a dynamic factor model encompassing many economic and financial variables, and a mixed data sampling regression incorporating common factors with mixed sampling frequencies. The model generates significantly more accurate forecasts for U.S. recessions with smaller forecast errors and stronger early signals for the turning points of business cycles than those generated by existing models.
This paper examines whether customer base composition in the US, that is, whether a firm’s major customers are government entities or publicly traded companies, affects the properties of its management earnings forecasts (MEFs). Using a sample of 1168 MEFs from 1998 to 2014, we find that firms whose major customers are government entities (i.e., government suppliers) issue more precise and more accurate MEFs than firms whose major customers are public companies (i.e., corporate suppliers). Moreover, when managers disclose negative information to the market, earnings forecasts issued by government suppliers have greater price impact than those issued by corporate suppliers. Collectively, our empirical results suggest that having major government customers has a positive impact on the quality of MEFs.
For many online businesses, online reviews are crucially important to managing reputation, word-of-mouth sales, and, ultimately, their survival. Hence, more and more online business owners are posting public responses to both positive and negative reviews. But do these responses change anything? And, if so, which types of responses are the most effective for strengthening customer relationship and increasing the chances of repeat business? With two surveys and a series of partial least squares-structural equation modeling (PLS-SEM) analyses, we tested three relevant hypotheses to answer these questions. The results show that when business replies to online reviews with promotional information, consumers perceive the seller to be self-interested, and both relationship quality and repurchase intention decrease. However, sincere responses that do not contain promotional information, such as gratitude and apology, are highly correlated to positive relationship quality and the likelihood of future repeat business. These findings enrich the academic literature on online reviews, and the recommendations stemming from our results should be of interest to any business that relies on their online reputation for survival.
In light of the increasing efforts made by emerging market firms to engage in international business through importing activities, identifying the characteristics that motivate importing business and contribute to its success is practically and theoretically meaningful. Drawing upon a knowledge-based view (KBV), we examine how the shareholder internationality affects a firm’s importing activities. We hypothesize that the shareholder internationality can facilitate a firm’s import initiation and contribute to the diversity of importing countries of origin. Moreover, the divergence of shareholders’ nationality backgrounds may hinder import initiation, but motivate importing from dispersed countries of origin during the import development process. A longitudinal analysis of Colombian firms supports our hypotheses.