How COVID-19 impacts Vietnam’s banking stocks: An event study method

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The banking industry is one of the major industries in the Vietnamese stock market, so understanding how the industry index reacts to unusual events such as COVID-19’s impact is very important for the development of the Vietnamese stock market. This study examines the response of the banking sector index to three lockdown/blockage announcements to prevent the COVID-19 epidemic in Vietnam in 2020. Three times of lockdown/blockage: On February 13, 2020, blockade of Son Loi commune, Vinh Phuc province; on March 30, 2020, Vietnam announced the nationwide epidemic of COVID-19 and then nationwide lockdown, and on July 28, 2020, blockade in Da Nang. In the first case, the abnormal returns changed the sign around the notification date indicating that the stock price deviated from its fair value, but accumulating abnormal returns CAR (0;3] and CAR (0; 2] are both positive and statistically significant, which means that investors are more secure when the epidemic area is tightly controlled. The nationwide lockdown was the event that had the strongest impact on the stock price when both AR and CAR were negative and statistically significant before and after the date of the event’s announcement. Nationwide lockdown was the event that had the strongest impact on stock prices as both AR and CAR were negative in the days before and days after the event. This result supports the theory of imperfect substitution. Only AR [2] was positive and statistically significant, showing that the blockade event in Da Nang had a slight impact on the banking sector’s stock price.

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    • Table 1. Abnormal profit (AR) and t-test results for three lockdown times due to COVID-19 in Vietnam
    • Table 2. Cumulative abnormal returns (CAR) and t-test results for three lockdowns due to COVID-19 in Vietnam
    • Conceptualization
      Lai Cao Mai Phuong
    • Data curation
      Lai Cao Mai Phuong
    • Formal Analysis
      Lai Cao Mai Phuong
    • Methodology
      Lai Cao Mai Phuong
    • Validation
      Lai Cao Mai Phuong
    • Writing – original draft
      Lai Cao Mai Phuong
    • Writing – review & editing
      Lai Cao Mai Phuong