COVID-19 and its impact on Indian construction industry: an event study approach

Abstract

COVID-19 has disrupted the normal course of production and livelihood activities across the world. This paper examines the short-term impact of this pandemic on one such strategically important sector, the construction industry of India. This study employs an event study approach to empirically study the market performance and response trends of the construction industry of India to the COVID-19 pandemic. The study finds that COVID-19 has negatively impacted the sector as reflected in the investors’ response during the pandemic window. Through further empirical analysis, we also find that this sector has been affected more vis-à-vis other similar industries. In addition, the study also highlights some broad recommendations and proposes a process framework with prescriptive strategies for relevant stakeholders to smoothen the post-COVID recovery process.

Keywords:

• Coronavirus
• COVID 19
• construction and real estate
• pandemic
• stock market

Acknowledgements

I want to thank Prof. Niyati Bhanja (MICA, Ahmedabad) for her friendly comments on an earlier version of the paper. Furthermore, I thank the editor Prof. Andreas Hartmann and the anonymous reviewers for their careful reading and invaluable suggestions, which markedly improved the final version of the manuscript.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Broadly, there are three methods of computing the abnormal returns viz. the constant returns model, the market adjustment model, and the market model. We have used the market model in this study. This model has been used extensively in past studies and has good predictive power (Brenner 1979, He et al. 2020).

2 The event window-5 suggests five days before the event and 5 suggests five days after the event. Please read the other event windows [–10, 10], [–20, 20], and [–30, 30] in similar fashion.

3 The NIFTY 50 is a benchmark Indian stock market index that represents the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange.

4 Events can typically be classified as information or occurrences that the market has not already priced.