COVID-19 Isolation, Managerial Sentiment, and Corporate Policies

Abstract

The COVID-19 outbreak has taken an unprecedented toll on the world’s economy and public mental health. Necessary lockdown and social distancing measures cause many individuals to experience isolation and remote working from home, resulting in mental health outcomes such as depression, stress, and pessimism biases. Using the granularity of foot traffic data during the 2020 pandemic year, we show that social isolation when working from home has strong negative effects on managerial sentiment. The evidence is robust to the identification strategy exploiting the staggered implementation of stay-at-home orders across the United States and alternative measures of managerial sentiment. Further analysis suggests that the COVID-19 isolation-induced managerial sentiment plays a role in corporate policies – homebound managers tend to adopt conservative corporate policies.