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The Effect of COVID-19 on Firms’ Behaviour: The Case of Japan

The Effect of COVID-19 on Firms’ Behaviour: The Case of Japan
13 March 2024
COVID-19, Trade
Yuting Chen, Bin Ni
COVID-19, parent-affiliate data, trade, Japan, firm performance

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Since the onset of the coronavirus disease (COVID‐19) pandemic, social distancing practices and government‐mandated lockdowns have become the norm. These have cut off interaction amongst people, firms, and society, triggering an even larger decline in economic activity. In this study, we apply annual Japanese foreign affiliate data to quantify how COVID-19 has affected firms’ behaviour in various aspects. The estimation results show that both the revenue and purchasing behaviour of Japanese foreign affiliates were affected during COVID-19. This negative impact is mainly through the channel of stringent regulations imposed by host countries where affiliates are located. The general result we can derive from these findings is that COVID-19 negatively affects Japanese firms engaged in overseas activities. This leaves us with the question of when external shocks such as COVID-19 stand in the way of firms’ overseas activities, and what role the government should play to achieve a balance between safety and economic revival.

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