Abstract
We investigate the effect of equity market volatility due to infectious disease on U.S. firms’ corporate activities from 1985 to 2020. Consistent with the theoretical framework, firms decrease their debt levels, debt maturity, corporate investments and dividend payout, and increase their cash holdings, research and development expenditure.
•Infectious disease pandemics have severe long-term consequences for firms, investors, and economies.•We investigate the relationship between infectious diseases and the U.S. firms’ corporate activities from 1985 to 2020.•Unlike the current corporate finance literature, the focus of this study is not on a specific pandemic, like COVID-19 or SARS.•We find that firms decrease their debt level, debt maturity, investment, dividend payments and increase their cash holdings, R&D expenditures.