Does COVID-19 prevention performance protect shareholders wealth in tourism-related industries?

The outbreak of infectious diseases inevitably causes a significant decline in the performance of the tourism, hospitality, and leisure industries. However, the impact of active epidemic-prevention measures on their performance, due to restrictions on daily activities, and that of proper epidemic control on the expectations of improved future performance, remain unexplored. This study aimed to investigate the effect of the announcement of Taiwan’s first confirmed COVID-19 case on shareholders’ wealth, stock trading frequency, and investment risk. Taiwan’s excellent epidemic-prevention performance makes its stock markets an appropriate empirical target to investigate the effects on stock price, trading volume, and return volatility, to obtain a comprehensive picture of investors’ behavior and reactions. Our results show that although active epidemic prevention did not prevent severe accounting performance decline, it only had a mild, short-term effect on investment performance. Thus, it protected shareholders’ wealth and strengthened their ability and willingness to continue business operations.