The role of non-critical business and telework propensity in international stock markets during the COVID-19 pandemic

We investigate the impact of non-critical business and telework propensity on stock prices during the COVID-19 pandemic using panel data comprising 15,238 firms across 46 countries. After eight months of the COVID-19 outbreak, we find that firms operating in non-critical industrial groups have stock prices 6.52% lower than firms in the same subsector that operate in essential industrial groups. We also examine corporate characteristics that exacerbated or mitigated this effect. We find that firms in non-critical industrial groups with high leverage, high human resource management inefficiency, and low intangible intensity before the pandemic suffered even more. For non-critical firms, we find that a one-standard-deviation increase in the subsector’s telework propensity results in a 10.20% increase in the firm’s stock price relative to firms in the same sector. Our research provides valuable empirical evidence for policymakers to understand the trade-off between containing the spread of the virus and restricting non-essential businesses, monitoring firms with specific corporate characteristics, and providing extraordinary support to those with a low propensity to telework during pandemics.