Resilience and Implied Discount Rates

This paper studies the implied rate of return, in particular during COVID-19to see whether and how it is affected by firms' resilience. Specifically, the novelty of the paper is not only to understand what types of resilience affect firms, and more important how to quantify firms' financial resilience but also to study cross-sectional resilience-heterogeneity in discount rate by providing several definitions of resilience measures.Results show to what extent the impact of workplace resiliencecan be amplified by the financial strength of firms in COVID-19 era. The paper proposes a novel composite-financial resilience index that can be used for the assessment of the pandemic's long-run effects on firms andsignificantly reveals low-resilience characteristics of firms and resilience-heterogeneity in implied discount rates. Results clearly show that implied discount rate for less resilient firms records the higher level with respect to its initial level, as opposed to more resilient firms. This suggests the longer effect of COVID-19 on expected return of low-resilience firms.