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Asian Review of Financial Research, Vol., No..
pp.1486~1513
pp.1486~1513
Local Dependence, Exogenous Shock, and Firm Value : Evidence from Korea¡¯s 2020 Coronavirus Crisis
Yonghyun Kwon Assistant Professor, College of Economics & Business, Department of Global Business, Changwon National University
The 2020 Coronavirus pandemic is exerting an enormous shock on the Korean economy. Using data on the location of a firm¡¯s headquarters and main bank branch, I find that the value of firms located in Daegu is being affected negatively since the announcement of a mass infection at the Shincheonji Daegu church. In particular, using proptech, I show that the distance between the infection¡¯s epicenter and a firm¡¯s headquarters affects the stock market reaction negatively. Furthermore, I find that the exogenous shock the Coronavirus crisis is causing has stronger negative effects on firms with high information asymmetry and those not Chaebol-affiliated. This study sheds light on our understanding of the economic effects of a city¡¯s paralysis using a unique world event. My results suggest also the potential risk of clustered headquarters and factories attributable to unpredictable community quarantines.
Yonghyun Kwon
The 2020 Coronavirus pandemic is exerting an enormous shock on the Korean economy. Using data on the location of a firm¡¯s headquarters and main bank branch, I find that the value of firms located in Daegu is being affected negatively since the announcement of a mass infection at the Shincheonji Daegu church. In particular, using proptech, I show that the distance between the infection¡¯s epicenter and a firm¡¯s headquarters affects the stock market reaction negatively. Furthermore, I find that the exogenous shock the Coronavirus crisis is causing has stronger negative effects on firms with high information asymmetry and those not Chaebol-affiliated. This study sheds light on our understanding of the economic effects of a city¡¯s paralysis using a unique world event. My results suggest also the potential risk of clustered headquarters and factories attributable to unpredictable community quarantines.