The impact of COVID-19 on company performance per industry sector: Evidence from South Africa

Abstract

Orientation: Governments across the world have adopted a variety of preventative measures to curb the spread of the coronavirus disease 2019 (COVID-19). The full socioeconomic costs present a significant threat to economic growth, with developing economies such as South Africa predicted to be the worst affected.Research purpose: This study assessed the impact of COVID-19 on company performance based on the various industry sectors of the Johannesburg Securities Exchange (JSE) of South Africa.Motivation for the study: The study builds on the growing body of knowledge on the impact of COVID-19 on company performance in a South African context.Research approach and method: All JSE-listed companies were analysed for the period 2014–2020. Descriptive statistics and regression analyses were applied to assess the impact of COVID-19 on company performance per industry sector and to identify the mechanisms through which company performance was affected during the pandemic year.Main findings: Company performance per JSE industry sector suffered a significant negative impact during the 2020 pandemic year. Sectors were affected differently owing to the idiosyncratic nature of each industry. Cash-flow-related variables significantly affected company performance during the pandemic year.Practical implications: A healthy cash flow is paramount in times of crisis. Investors and other stakeholders should be cognisant of how industry sector idiosyncrasies affect company performance during crises.Contribution: Results may provide insights into the effect of COVID-19 on company performance per industry sector in South Africa, to support the mitigation of the negative consequences of COVID-19 and future crises or pandemics.

Sectoral Performance Trends and Differences in the Balkan and Eastern European Region

“…The COVID-19 pandemic in 2020 appears to have caused a brief halt to the trends shown in Appendix A. This is especially notable in the case of profitability, margin, trade turnover, solvency, and leverage ratios, as also demonstrated by prior empirical studies inter alia, Muthu and Wesson (2023), Suman et al (2022), andWijayanto andSeno (2021).…”

“…The two traditional liquidity ratios follow the importance of margin ratios, emphasizing the necessity of possessing adequate current assets to meet short-term liabilities. The significance of these ratios has been acknowledged in several previous studies, including those conducted by Kurniawandi (2021) and Muthu and Wesson (2023).…”

“…It is not surprising that empirical research on COVID-19 has been very active in recent years, with numerous articles demonstrating varying experiences in developed and emerging nations. For example, Muthu and Wesson (2023) discovered that cash-flowrelated variables significantly affected performance levels and that COVID-19 generally had a severe negative impact on industrial sectoral performance in South Africa. Significant differences were found between the sectors after Oppusunggu et al (2023) looked at market indicators and Wijayanto and Seno (2021) used multivariate analysis of variance (MANOVA) methods to study trends of sectoral performance in Indonesian business sectors, with a focus on COVID-19.…”