The Impact of COVID-19 on the Saudi Stock Exchange and its Comparison to the Impact of MERS-CoV on the Stock Market

Abstract

The world’s economy has been hit severely by the pandemic COVID-19. As the lockdown and the measures associated with this unprecedented phenomenon were announced, the markets plunged globally. We examined the effect of this on the Saudi Stocks Exchange Tadawul and compare it with that one of the previous epidemic MERS-CoV by conducting an event study. The regression analysis then examined whether the drivers of the abnormal return were the firm’s working capital or not. We find that both COVID-19 and MERS-CoV have an insignificant impact on Tadawul, despite the market fall by 7%. In addition, we find that the relationship between the cash holding pre-COVID-19 of the firm and the abnormal return was positive whereas the post-COVID-19 results showed a highly negative relationship. These results were primarily in the first two quarters of 2020.