Consequences of COVID-19 Shocks and Government Initiatives on Business Performance of Micro, Small and Medium Enterprises in Saudi Arabia

The purpose of this paper is to determine how COVID-19 shocks and government policies affected MSMEs’ financial and non-financial performance during the economic turmoil. The paper used both quantitative and qualitative methods. An online questionnaire survey was used to collect quantitative data from 380 Saudi MSMEs. The direct effects of the exogenous variables on the endogenous variable were determined using partial least squares structural equation modeling (PLS-SEM). Furthermore, multigroup analysis was used to examine the moderating effect of policy response on other variables. Interviews were conducted from a qualitative standpoint, and the information was converted into texts and qualitatively analyzed. Demand Shocks, Management/Operational Shocks, and Supply Shocks all have a significant impact on financial performance. The only significant predictor of non-financial performance was demand side shocks. Management/operational side shocks, on the other hand, have no effect on the non-financial performance of MSMEs. Furthermore, policy response was found to be a powerful predictor of both financial and non-financial performance. During the COVID-19 outbreak, MSMEs’ policies and assistance programs had no discernible impact on demand and supply side shocks, as well as financial and non-financial performance. Overall, the findings of this study will help the Saudi government and other policymakers determine the best way to deal with current and future COVID-19 pandemics.