Firm internationalization and long-term impact of the Covid-19 pandemic

We infer market expectations regarding the relationship between firm internationalization and the long-term impact of the Covid-19 pandemic by using a novel approach to decompose global stock prices into their short- and long-term value components. In general, firms with a greater proportion of foreign assets show greater losses in the long-term value component, suggesting investor expectations of higher supply-chain restructuring costs for such firms. Also, investors appear to have priced in the likely permanent benefits of such restructuring for firms from emerging Asian economies, as these economies may be well-placed as alternative sourcing bases to China.