Effects of the COVID-19 pandemic on the market value of Japanese gaming companies

ABSTRACT

In this study, we examine the short-term stock price reactions of Japanese gaming companies to events related to the coronavirus disease 2019 (COVID-19) pandemic. Using the event study method, we first estimate stock price reactions to the outbreak of the pandemic and the declaration of a state of emergency. We then perform multivariate regressions to investigate the factors affecting market responses. Our results demonstrate that the stock prices of Japanese gaming companies reacted negatively to the outbreak of the COVID-19 pandemic, and the initial negative effects were greater for mobile gaming companies and for companies with small sizes or low Tobin’s Q. By contrast, the market has reacted positively to the declaration of the state of emergency, which perhaps drove more people to play games at home.

KEYWORDS:

• COVID-19
• gaming market
• state of emergency, event study

JEL CLASSIFICATION:

• G14
• M10

Acknowledgments

We express our gratitude to the editor and anonymous referees for their valuable feedback and helpful suggestions. We thank Editage (www.editage.com) for the English language editing. We take full responsibility for any remaining errors in this paper.

Disclosure statement

No potential conflicts of interest were reported by the authors.

Notes

¹ Hegedus 2021 also includes the variable named OCAP, which presents operating capacity, calculated by the ratio of total revenue to total assets. We do not use this variable because it has strong correlation with ROA, generating multicollinearity problem.

² Concerning the term ‘console game’, in this study, we include both PC and console games, given that many gaming companies creating console games also have a PC version of their game titles.

Additional information

Funding

This work was supported by Keio University Academic Development Funds