Does Absorptive Capacity Protect Shareholder Wealth in Times of Crisis? Evidence from the COVID-19 Pandemic

Authors

Amanjot Singh, King’s University College at the University of Western Ontario

Abstract

R&D capital increases firms’ ability to identify, absorb, and utilize new external information. Firms with absorptive capacity become resilient to external shocks while providing an opportunity to protect shareholder wealth during a crisis period. This study examines the role of firms’ absorptive capacity in protecting shareholder wealth around the COVID-19-induced stock market crisis. Our findings report that firms’ absorptive capacity is positively related to stock returns of US firms during the COVID-19 pandemic. This positive relationship exists irrespective of investor attention and is robust to the propensity-score-matching approach. Overall, the results imply that R&D capital makes firms resilient to external shocks.

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Recommended Citation

Singh, Amanjot (2022) "Does Absorptive Capacity Protect Shareholder Wealth in Times of Crisis? Evidence from the COVID-19 Pandemic," American Business Review: Vol. 25: No. 1, Article 6.
DOI: 10.37625/abr.25.1.83-91
Available at: https://digitalcommons.newhaven.edu/americanbusinessreview/vol25/iss1/6

DOI

10.37625/abr.25.1.83-91