Small business under the COVID-19 crisis: Expected short- and medium-run effects of anti-contagion and economic policies

Measuring the Struggle of Small-Scale Businesses in the COVID-19 Environment

Small-scale business owners are among those who were very affected when the COVID-19 pandemic hit the country. This group supports their families solely through daily sales profits. However, when the country began implementing the Movement Control Order (MCO) from March 2020 to May 2020, it was difficult for this group to survive. Some of them were unable to do business at all, while the majority experienced a significant decline in sales. This study aims to measure the ability of small-scale business owners to survive before and after the COVID-19 period. GIS software (ArcMap 10.4.1) was used to map the ability of small-scale business owners to survive before and after the pandemic. Data were obtained through face-to-face questionnaires conducted throughout the state of Kedah. Findings indicated that several districts have successfully managed the pandemic for economic survival. This was achieved through a well-collaborated effort by the government and NGOs to strengthen certain aspects of these small-scale business and revive their growth. Future work should focus on studying the actions taken by successful business owners in coping with the pandemic environment.

Impact of Consumer Awareness and Behavior on Business Exits in the Hospitality, Tourism, Entertainment, and Culture Industries under the COVID-19 Pandemic

Empirical studies on small business survival and exits focus on endogenous firms and top manager characteristics, whereas few studies consider exogenous demand shocks and local consumer awareness and behavior, which are especially important for local hospitality industries. Therefore, this study addresses this research gap by targeting the COVID-19 pandemic and anti-contagion policies as a local demand shock for service industries. We empirically investigate the causal effects of changing local consumer awareness and behavior under COVID-19 on business exits at the prefecture-industry level. Based on a panel fixed-effect estimation using a longitudinal dataset of 32 service industries in 47 prefectures over 10 months in Japan, we demonstrate that an increase in consumers’ risk aversion and sympathy for self-restraint from going out, and a decrease in going out with family members, significantly increase the exit ratio in specific service industries in the same prefecture. Moreover, we find that these effects vary by consumer type depending on factors such as gender, age, income level, and household structure.

Riding out the COVID-19 storm: How government policies affect SMEs in China

Based on a nationally representative survey on SMEs in China, we study the impact of government policy interventions on SMEs during the COVID-19 pandemic. Our findings are three-fold. First, relief policies in the form of payment deferrals and exemptions significantly improve SMEs' cash flows and further stimulate their operational recovery. This effect is more pronounced for firms with larger shares of high-skilled employees. Second, financial support policies do not appear to be effective in alleviating SMEs' cash constraints or encouraging the reopening of small businesses, potentially due to difficulties in accessing policy-oriented loans and misallocation of credit. Last, regional and local lock-down policies decrease SMEs' incidence of reopening and delay their expected reopening in the near future, likely by reducing consumer demand. Our findings shed new light on the policy debates on supporting SMEs during the COVID-19 pandemic.

The impact of COVID-19 on Japanese firms: mobility and resilience via remote work

Drawing on the original survey of Japanese firms during the COVID-19 pandemic, we estimate the impact of the crisis on firms' sales, employment and hours worked per employee and roles of work-from-home (WfH) arrangements in mitigating negative effects. We find that the lowered mobility, induced by the state of emergency declared by the government and fear of infection, significantly contracted firms' activities. On average, a 10% reduction in mobility reduced sales by 2.8% and hours worked by 2.1%, but did not affect employment. This muted employment response is consistent with limited changes in aggregate employment at the extensive margin during COVID-19 in Japan. We find that the adoption of WfH before COVID-19 mitigated the negative impact by 55% in terms of sales and by 35% in terms of hours worked. Adapting to the pandemic by increasing the number of remote work employees also helped firms moderately mitigate the negative impact on sales and work hours and reduce the probability of filing for the short-time work subsidy.

SUPPLEMENTARY INFORMATION

The online version contains supplementary material available at 10.1007/s10797-022-09749-7.

Social punishment for breaching restrictions during the COVID-19 pandemic

In response to the novel coronavirus outbreak, the Japanese government requested the temporary closure of businesses. Consequently, complying with restrictions came to be recognized as the social norm, and stores that continued with business as usual were seen as norm-breakers. This study empirically investigates costly punishment behavior for stores' violation of restrictions and how this behavior changes when a decision-maker receives information pertaining to contrasting norms, implicitly requiring the opposite response. By implementing joy-of-destruction minigames, we found that costly punishment behavior for norm-breakers was significantly stimulated (by approximately 11%) but not increased when additional information was provided.

Measuring business-level expectations and uncertainty: survey evidence and the COVID-19 pandemic

Utilizing a unique firm-level survey in Japan that contains five-bin forecasts for sales, we document three findings. First, firm-level subjective uncertainty is highly and positively related to volatility of past firm growth. Second, there are substantial variations in subjective uncertainty across firms, with a long right tail with extremely high subjective uncertainty. In addition, firms that have exposure to international businesses either through international trade or foreign direct investment have both higher average expected sales and subjective uncertainty. Finally, the sudden escalation of the COVID-19 pandemic in January-February 2020 led to a substantial increase in firms' subjective uncertainty. Our triple-difference estimation results show that this effect is especially large for firms that have direct exposure to China through international trade and foreign direct investment.