The Impact of COVID-19 Pandemic on the Financial Performance of Firms Listed on the Pakistan Stock Exchange (PSX)

Abstract

The COVID-19 Pandemic currently is a prominent risk factor for the global economy. The Spread of COVID-19 indicates that pandemics or catastrophes which were happened in the ancient times and will continue to be happen in the future. The present COVID-19 outbreak shows no single country was unaffected from its consequences and it had harsh socio-economic consequences across the world.  Its Sevier effects on society brought dramatic changes in businesses operations and consumers behaviors. This study tries to quantify economic consequences by analyzing the Impact of COVID-19 Pandemic on the Financial Performance of Firms listed on the Pakistan stock exchange. A sample of 267 listed companies was included in the study to test the difference of financial performance before covid-19 in 2019 and during covid-19 in 2020; the Wilcoxon Signed Rank Test was performed. Our results indicate decrease in profitability, decrease in return on assets (ROA). The negative ROA shows the negative effects of COVID-19 on the financial performance of the Pakistani listed companies. The results also indicate increase in overall debt level, increase in debt to equity ratio (DER) of the listed firms in Pakistan Stock Exchange (PSX) during Covid-19 pandemic. The results also revealed no significant difference in current ratio (CR) and receivable turnover ratio (RTO) between before and during the COVID 19 pandemic. Even though we cannot prevent dangerous viruses and crises from spreading but we should be prepared well to reduce their possible effects on humanity. The policy implication of this study includes, the recovery policies from pandemic/crises should give more importance to boosting or stabilizing the sales and discouragement of excessive trade credit, and maintaining stable logistics should be the key intervention policies.