Linking government interventions to firm performance: the influence of stringency and support during the COVID-19 pandemic

Abstract

PurposeThis study uncovers how government interventions, in terms of stringency and support, shape coronavirus disease 2019's (COVID-19) detrimental impact on organizations' performance. Specifically, this paper studies whether stringency and support play complementary or substitutive roles in lowering COVID-19's impact on organizations' performance.Design/methodology/approachThe authors gathered primary data from USA manufacturing companies and combined this with secondary data from the Oxford COVID-19 Government Response Tracker (OxCGRT) to test the proposed model with structural equation modeling (SEM).FindingsThe results show that the stringency approach increases the detrimental impact on both operational and financial performance, while economic support (to households) and fiscal spending (to organizations) work differently on lowering the impacts of COVID-19. Further, these combinative effects only influence the firm's operational performance, albeit in opposite directions.Originality/valueThis study advances the knowledge of government interventions by examining stringency and support's direct and interaction effects on firm performance as a result of the COVID-19 pandemic. The findings contribute to the literature by uncovering the unique roles of both supportive policies, thus differentiating economic support (to individuals/households) from fiscal spending (to organizations) and providing important academic, managerial and policy insights into how government should best initiate and blend stringency and support policies during the COVID-19 pandemic.

Did government support delay bankruptcy during the pandemic?

“…The pandemic may have been a special case as policymakers and governments implemented restrictions and lockdowns that had not been seen before. Stringent lockdowns have been found to have had an adverse effect on firms' operational and financial performance, leading to constrained labour capacity and supply–demand balance as firms were unable to produce at capacity (Zou et al, 2023). Moreover Zou et al (2023) stress that Covid‐19 restrictions led to further supply shocks as consumers engaged in speculative buying, changing the demand patterns for many goods and services.…”