Work from Home, Managerial Sentiment, and Corporate Liquidity Management: Evidence from COVID-19

This study exploits the pandemic-triggered adoption of remote work as a natural experiment to
systematically analyze whether and how it affects management’s subjective judgment through its
effect on their sentiment. Using the granularity of foot traffic data, we show that work from home
dampens managerial sentiment through two psychological mechanisms: social isolation and work
stress. This baseline result is robust to the identification test exploiting the implementation of
stay-at-home orders across the United States. Further analyses suggest that the induced negative
sentiment elevates managers’ perceived risk, driving them to accumulate more cash. However, such cash buildup destroys shareholder value.

Keywords: COVID-19, Work from Home, Managerial Sentiment, Corporate Cash Policy

JEL Classification: G02, G32, G39

Suggested Citation: Suggested Citation

Ng, Lilian and Yu, Jing and Yu, Linyang, Work from Home, Managerial Sentiment, and Corporate Liquidity Management: Evidence from COVID-19 (December 7, 2022). Available at SSRN: https://ssrn.com/abstract=3837134 or http://dx.doi.org/10.2139/ssrn.3837134