The Impact of Covid-19 Global Crisis on the Firm’s Performance: Evidence from Listed Material Sector Companies in Sri Lanka

Abstract

The purpose of this study is to examine the impact of Covid-19 on the profitability of the material sector firms in Sri Lanka using ROA and ROE as the profitability measures. The commendable performance of the material sector equity index during Covid-19 period motivates this study to investigate whether the profitability of the sector backs the observed performance in the equity index. For this purpose, this study performs both parametric and non-parametric comparison tests on quarterly data gathered using annual reports from 2018Q1 to 2021Q1. Further, this study employs panel regression models to identify whether the differential effect of Covid-19 on profitability is immune to other controlling effects. Additionally, this study investigates the reasons behind the profitability patterns by analyzing annual reports' content. The results of this study confirm that during the first quarter of the year 2021, the ROA and ROE are greater than the per Covid period ROA and ROE. The major external reason for the higher profitability is the relaxed government policies implemented during the Covid-19 period. Accordingly, the findings of this study imply that supportive government policies enhance the performance of firms during crisis periods.