COVID-19, firm characteristics and stock volatility: new evidence from the Indian tourism sector

Abstract

PurposeThis paper provides new evidence on Indian tourism firms by investigating the role of a firm's financial conditions typified by its leverage, earnings, size, cash holdings, and excess cash in moderating the pandemic-led idiosyncratic volatility in its stock prices.Design/methodology/approachThe authors employ a firm-level panel comprising 82 publicly-listed tourism firms from India. Firm risk is estimated for the period beginning January 2020 to December 2020.FindingsThis paper finds non-linear effects of the pandemic on the idiosyncratic risk of the sample firms. Precisely, stock price volatility rises, but as the market absorbs this information, volatility subsides even as the disease spreads further. Further, lower levels of past debt and earnings and higher cash holdings ameliorate the pandemic's effects on tourism firms' risk. Contrasting the view that “excess” cash reflects poor operational performance, we show that “excess” cash firms are better prepared to face the adverse effects of the pandemic.Research limitations/implicationsThis study’s sample period fully encompasses the first wave of the pandemic (January–December 2020) of the novel coronavirus infection spread.Originality/valueTo the best of the authors’ knowledge, this is the first study to assess the moderating effects of company fundamentals on the risk of Indian tourism firms. In doing so, the authors account for non-linear effects of the pandemic on firms' idiosyncratic volatility over time.

Level of pandemic consequences for the indebtedness of the Slovak hospitality sector

“…The consequences of the pandemic on the risk faced by tourist enterprises are further mitigated by lower levels of historical debt and profitability as well as larger cash reserves. The enterprises with enough cash and cash equivalents were better equipped to deal with the negative consequences of the pandemic (Khana et al, 2022). The results of the international studies confirm the importance of the earnings when assessing the effects of the pandemic on this sector.…”