Covid-19 pandemic, firms' responses, and unemployment in the ASEAN-5

Numerous studies have explored the impact of the Covid-19 pandemic on firms' financial performance, but the link between such performance and employment has rarely been estimated rigorously. Using the ASEAN-5 firms' data from Q1-2018 to Q3-2021, this study shows how the pandemic affects firms' revenue, cost, profitability, and employment heterogeneously across countries. It is argued that while revenue losses are the main challenge, widespread and prolonged restrictions in some countries have created extra complications in idle inventories and labour. In response to the revenue shocks, firms reduce their employment with an elasticity of around 0.10, indicating that a 10 per cent revenue decline is associated with a 1 per cent headcount reduction in the short run. A further examination using event analyses reveals that the path of labour adjustment is diverse across countries and industries, reflecting the degree of pandemic severity and countries' structural issues. (C) 2022 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.

Automated summary

This study explores the impact of the Covid-19 pandemic on firms' financial performance and employment using ASEAN-5 firms' data. The results show that while revenue losses are the main challenge, widespread and prolonged restrictions in some countries have created additional complications in terms of idle inventories and labor. In response to revenue shocks, firms reduce employment with an elasticity of around 0.10, indicating a 1% reduction in headcount for every 10% decline in revenue. The study further reveals that the path of labor adjustment varies across countries and industries, reflecting differences in pandemic severity and structural issues.