Abstract: The COVID-19 pandemic has disrupted every facet of life globally. Business and commerce are key areas where the monetary crunch has been acutely felt. This study aims to analyze the various key changes in entities’ activities to evaluate the level of business performance in response to the COVID-19 pandemic. For this purpose, we use panel data analysis on 21
8 Romanian listed companies of different sizes (big and small) and belonging to different business sectors for the period June 30, 2019–June 30, 2020. We find that the net profits of the overall market decreased by 37.43% over the analyzed period. However, small companies engaged in agriculture, commerce, construction, IT R&D, and transport and storage witnessed better financial performance. In addition, our results show that equity financing, proper liquidity management, and an increased company size consolidate the economic performance of entities regarding return on equity and return on assets. Our findings are useful for policymakers such as managers and investors and can help them make the best decision for their managing or investing activities. Moreover, governments need to know how companies respond to the pandemic to identify the sectors of activity that are more vulnerable to the crisis’ effects and the main financial management decisions that must be adopted by companies during times of crises.
Introduction: The COVID-19 pandemic has caused significant difficulties for business environments globally. The lockdown measures and reduction in mobility have created many obstacles within the s
upply chain (Sharma et al., 2020) and have threatened the continuity of all companies’ activities, on a broad range of types of entities, from listed companies (Rababah et al., 2020) to small and medium-sized enterprises (SMEs) (Kalemli-Ozcan et al., 2020).
At the time of our research (January 25, 2021), numerous papers had been published on the COVID-19 pandemic and business. Specifically, we found 2118 articles indexed in Scopus and 935 papers indexed in Web of Science for this research area. However, few studies (Dimson et al., 2020; Kalemli-Ozcan et al., 2020) have analyzed key changes in entities’ activities to evaluate the lev
el of business performance as responses to the COVID-19 pandemic. Our study intends to fill this gap in the literature by analyzing the effect of the pandemic on Romanian companies’ business performance. We use 218 Romanian listed companies of different sizes (big and small) belonging to different business sectors. The subcategories of big and small subsampled listed companies is made according to international standardization, considering micro-entities and small entities as ‘small’ and medium-sized entities and large ones as ‘big’. A series of key performance variables are determined based on the financial statements reported by these companies at the midpoint of 2019 and 2020 (June 30, 2019 and June 30, 2020, respectively).
Our results show that companies financed by equity with proper liquidity management and large company size consolidate their economic performance regarding return on equity (ROE) and return on assets (ROA). We note that the total net profits decreased by 37.43% by the middle of 2020 compared to the middle of 2019. Additionally, the total sales of the market decreased by 13
.86% during the same period. However, small companies engaged in agriculture, commerce, construction, IT R&D, and transport and storage witnessed improved financial performance.
There are various aspects of this study that make it novel. First, a bibliometric analysis of the relationship between COVID-19 and business is conducted using a novel tool—VOSviewer software. Even though this tool was used before for the analysis of researches on the topic of COVID-19 (Yu et al., 2020; Hamidah et al., 2020), to our knowledge our work is the first study that analyses the relationship between COVID-19 and business performances using a bibliometric analysis
with the help of the VOSviewer software. Second, important results on determinants of economic performance (return on equity and return on assets) are found after conducting multivariate data analysis on the panel data of our sampled companies. Thus, equity financing, proper liquidity management, and an increased company size consolidate the economic performance of entities regarding return on equity and return on assets. Third, we find significant changes in various financial indicators peculiar to the Romanian market, from the mid of 2019 compared to the mid of 2020, among companies of different sizes and in different business sectors in Romania. Thus, we find significant reductions in the return on equity and return on assets due to the increase of the level of indebtedness, reduction of total assets, reduction of net working capital, while the quick and cash ratios significantly decrease throughout the studied time period. Fourth, we find that the net profits of the overall market decreased by 37.43% on the mid of 2020 compared with the mid of 2019. However, we find that on average, small and medium-sized companies obtained higher growth rate of profits than big companies throughout the pandemic period, being more flexible to the new requirements i
mposed by the pandemic-impacted business world. More exactly, small companies
engaged in agriculture, commerce, construction, IT R&D, and transport and storage witnessed better financial performance on the period of crisis compared to the previous period.
The remainder of this paper is structured as follows: Section 2 presents a review of the literature on the COVID-19 pandemic and businesses. Section 3 describes the methodology, sample, and data used in our research, while Section 4 presents the results and discussions. The paper ends with the conclusions and limitations of our research and suggests avenues for future studies.
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