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Webinar on ‘Effect of COVID-19 Lockdown on the Profitability of Firms: Evidence from an Emerging Economy’: 25 Sept. 2020

A Webinar on ‘Effect of COVID-19 Lockdown on the Profitability of Firms: Evidence from an Emerging Economy’ was presented by Dr Ritika Jain, Assistant Professor, CDS over CISCO Webex Meetings on Friday, the 25th of September, 2020, at 3.30 pm. Professor Sudip Chaudhuri, Visiting Professor, CDS was the moderator of the webinar.
Abstract: We examine the effect of COVID-19 induced lockdown on the profitability of listed firms in an emerging market, India. With restrictions on labor mobility, a repressed supply and weakened demand condition, we hypothesize that firms struggle to keep businesses running and hence, lose profitability due to the lockdown. We use the earliest available financial information of 2500 listed firms for the June 2020 quarter and compare their financial data with previous quarters (2017-2019). Using a difference-in-difference estimation framework, we find that the COVID-19 lockdown has reduced real profit after tax by 15%, return on sales by 4%, earnings per share by 16% and profit growth by 4% in India. We find evidence of the firms losing revenues and reducing expenses in the lockdown, representing a suppressed demand and cost condition. Moreover, we build on how institutions play an important role in shaping firm performance and test if the impact on profitability is conditioned by institutional factors. We find that the impact is more pronounced for firms operating in states that followed more stringent lockdown protocols and in states that had more COVID-19 spread.