Sentiment and firm behavior during the COVID-19 pandemic

Abstract

How did optimism or pessimism about the duration of shutdowns during the COVID-19 pandemic affect firms’ business outlook and behavior? In a large panel of German firms, we identify sentiment as the only plausible determinant of the cross-sectional variation in the expected shutdown length because this variation is uncorrelated with fundamentals. Firms incorporate this sentiment regarding the shutdown duration in their more general business outlook. Sentiment was also an important determinant of firms’ crisis response: More pessimistic firms—those that perceived the shutdown to last longer—were more likely to implement strong measures like layoffs or canceling investments. The implementation of soft measures, e.g., working from home, was unrelated to the sentiment regarding the shutdown length.

Expectation management of policy leaders: Evidence from COVID-19

“… Buchheim et al (2022) obtain similar findings for German firms in April 2020 that, on average, expected the crisis to be over by August 2020.…”

“…As a consequence, many choices (as well as macroeconomic expectations) of individuals and firms depend on the expected duration of the pandemic. For example, Buchheim et al (2022) find that German firms that expected the shutdown to last longer were more likely to lay off workers or to cancel or postpone investment projects in 2020. Generally, the scope of economic responses to the duration of the pandemic was seen as large.…”

What can analysis of 47 million job advertisements tell us about how opportunities for homeworking are evolving in the United Kingdom?

“…At the height of the lockdown in April 2020, over 40% of UK workers were working from home (Felstead & Reuschke, 2020). Similar trends were evident in the United States and major European countries, with between 35% and 50% of all workers working at home (Bick et al, 2020; Brynjolfsson et al, 2020; Buchheim et al, 2022). Of course, not all jobs can be undertaken from home.…”

The impact of Covid-19 containment lockdowns on MSMEs in India and resilience of exporting firms

“…Using this shock, we bolster the findings of this literature. Firms participating in the international market are more flexible in adopting remote work operations, which helps mitigate the negative effects of the pandemic ( Buchheim, Dovern, Krolage, Link, 2022 , Liu, Ornelas, Shi, 2022 ). A growing trade literature also documents that exporting firms rely more on trade credit than other firms ( Antras, Foley, 2015 , Demir, Javorcik, 2018 , Garcia-Marin, Justel, Schmidt-Eisenlohr ).…”