Covid Crisis and Stock Market Crash: Evidence from Selected European Hospitality Firms

Abstract

This article investigates the performance of 12 European firms active in the hospitality industry during the financial crisis triggered by COVID-19. The analysis adopts weekly data on the total number of confirmed COVID cases in EU countries for the period between the first week of March and the last week of December 2020 to estimate the impact of this crisis on the stock returns of firms with various financial characteristics. The estimations are based on the generalized estimating equations (GEE) method, which is a convenient approach for analyzing correlated variables. The findings confirm the negative impact of the crisis on stock returns. However, the larger firms with more cash flows can derive investors' positive market valuation through better self-funding. This study contributes to the literature by first identifying the drivers of the stock price returns of hospitality firms during an unprecedented economic depression and second by introducing the most practical approaches to help the hospitality industry to survive future health crises considering the design of this industry in the postpandemic world. The findings of this study provide vital themes for investment performance in the case of similar crises in the future.