Corporate Financial Measures and Covid-19 Pandemic with Evidence from the Growth Enterprise Market of China’s Shenzhen Stock Exchange

Abstract

The Covid-19 pandemic has caused huge losses of lives. Social distancing policies were enacted in an effort to contain the virus. However, they constrained commercial activities, leading to recessions worldwide. Nevertheless, this situation provides an opportunity to investigate how companies' financial measures of liquidity, solvability, activity, and profitability reacted to external risks similar to the pandemic. This paper approaches this issue by collecting data from companies listed on China's Growth Enterprise Market of Shenzhen Stock Exchange. Due to the limited numbers of companies from several industries, only six industries that contain more than 30 companies listed were selected. Several ratios for liquidity, solvability, activity, and profitability were calculated with reported financial data and mapped throughout the studied period. Changes were recorded to determine the sensitivity of these measures. How price changes responded to the increases in the number of covid cases was studied as well. The first finding is that liquidity and solvability ratios were not sensitive to the pandemic for the studied companies. On the contrary, activity and profitability were negatively influenced severely. In addition, prices had a negative relationship with increases in covid cases in general, but the regression result was not statistically significant due to the lack of representations.