6.2. The Effectiveness of Community Lockdown: Pre- versus Post-Lockdown Period
Considering the speedily spreading of COVID-19 in Wuhan province, Chinese governance decided to restrict human mobility by ordering a Wuhan lockdown since 23 January 2020. Moreover, China extends lockdown to more areas by implementing the “closed community management” measures. In February 2020, many provinces had selected the community lockdown mode. Prior research [9] finds that lockdown effectively mitigated the spread of COVID-19. We expect investors may notice the positive effects of lockdown and will restrain the risk assessment during the post-lockdown period. For testing this assumption, we substitute Conditioning_VAR in Model (3) with POST_Lockdown. Here POST_Lockdown is an indicator variable that equals one if the firm is in periods after implementing the "closed community management" measures and zero otherwise. The information of the lockdown periods by province is shown in the Appendix B. Table 11 shows the regression results, and we find that the coefficients of CIPHT × POST_Lockdown in both columns are positive and significant, which consistent with our assumption that community lockdown could mitigate the effect of continued increasing public health threats on accumulative abnormal return.