Firms with higher digital transformation level show market resilience amid COVID-19 pandemic

Singapore, July 27, 2020 – The share prices of firms with a higher level of digital transformation have not fallen as much as firms with lower level of digital transformation during the onset of COVID-19 pandemic, a recent study by the Singapore University of Social Sciences (SUSS) found.

The study tracked the daily closing share prices of 1567 NASDAQ-listed firms across 37 sectors between January and April 2020, as market sentiment plummeted with the spread of the COVID-19 pandemic.

The sectors include Chemical, Electric Utilities, Engineering and Construction, Financial Conglomerates, Food Retail, Insurance, Real Estate, Telecommunications, and Wholesale Distributors.

“We chose the period from January to April to allow a reasonable amount of time lag for the COVID-19 outbreak to generate public attention and stir market sentiment. The timeframe also witnessed businesses going online or expanding their digital offerings due to social distancing measures and lockdown,” said Vice Dean of SUSS’ School of Business Associate Professor (A/P) Ding Ding, the lead author of the paper.

“This research is among the first to demonstrate how digital transformation may give rise to share price performance. Investors and stock analysts can pay more attention to a firm’s level of digital transformation in their future research and selection of stocks to add to their portfolio,” she added.

The other three researchers who conducted the study are School of Business faculty member Dr Liu Wenting; and Office of Graduate Studies’ Director A/P Calvin Chan and Deputy Director A/P Guan Chong.

Firms covered in the study

This sample of 1567 firms covered 36.6% of all the stocks traded on the NASDAQ. These firms are considered to be an economically significant component of the total market as they accounted for 45% of total NASDAQ trading volume in the first quarter of 2020. The range of market capitalisation of firms in the sample is also substantial, ranging between US$6,999 million and US$16,280,208. The average market capitalisation for the sampled stocks is US$8,587 million.

The firms are grouped into six clusters using the McKinsey Global Institute’s (MGI) Industry Digitalisation Framework. MGI examined the state of digital transformation across different sectors and identified six clusters representing different degree of digital transformation. The MGI study found that firms that are more advanced in their digital transformation experienced better growth in productivity and profit margins.

The analysis of the current study resulted in a further streamlining of the firms into three clusters of high, medium and low level of digital transformation.

Level of Digital Transformation

Example of Companies

Degree of Market Resilience


Amgen; Cisco Systems; Accenture; IBM; Citigroup; American Express; Prudential Financial; Alphabet; Facebook; NetEase; Baidu; PayPal Holdings; Robert Half International; CenturyLink; Apple; China Mobile; T-Mobile US; Vodafone Group



American Tower; Crown Castle International Corp; CNOOC; ConocoPhillips; EOG Resources; NextEra Energy; Dominion Energy; Duke Energy; Fastenal Company; Linde; Ecolab; CBRE Group; VICI Properties; TJX Companies; Ross Stores;

Lululemon Athletica; Caterpillar; Deere & Company



Archer-Daniels-Midland; Elanco Animal Health; Marriott International; Hilton Worldwide Holdings; Royal Caribbean Cruises; UnitedHealth Group; Cigna Corporation; Anthem


Google Trends

Market sentiment is modeled after Google Trends, which tracks what Google search engine users around the world have been searching for. Although using search trend as proxy for market sentiments is an indirect measure, this is a great improvement over the use of dummy variables in other studies. Search trends capture the collective interest and concern of the wider  population, and thus offer a more realistic and timely reflection of market sentiment.

To ascertain that the above result is attributable to the pandemic, an augmented vector auto regression model is used to test the mutual causality relationship between Google Trends and share prices of firms across the high, medium and low level of digital transformation.

The result showed that the Google Search Trends on the word ‘Coronavirus’ caused a negative effect on the share prices of firms with low and medium level of digital transformation.

On the other hand, the Search Trends on ‘Coronavirus’ are positively related to the share prices of firms with high level of digital transformation.

Various COVID-19 related keywords, such as ‘pandemic’ and ‘COVID-19’, were also tested. However, Google Trends revealed that only the keyword ‘Coronavirus’ showed a significant search trending and is thus adopted.

Dr Liu Wenting, one of the researchers in this study, explained: “A reason for this may be  the term ‘COVID-19’ was only established by the World Health Organisation in February 2020, midway through  the chosen period of this study. Thus the term ‘COVID-19’, may not have gained popular mindshare by the masses during the initial period. The term ‘pandemic’ may also be too generic and may not appropriately capture the flux of interest on this particular COVID-19 pandemic.”  

Additional observations

A/P Guan Chong: “During this pandemic, with the imposed shutdown or “circuit breaker” measures around the world, firms with higher level of digital transformation may still continue to maintain some degree of business operations and trade. Hence, it is understandable that if the market has more favourable sentiments towards such firms, which explains their market resilient.”

A/P Calvin Chan: “There is much anticipation that the post COVID-19 ‘new normal’ will continue to be digitally oriented. It is therefore also possible that the market resilience is in anticipation of this ‘new normal’ as firms with higher level of digital transformation are better prepared for it.”

A/P Ding Ding: “Our research has provided important insights into firms’ performance in the stock market during a crisis or volatile period. In the past few years, firms in the technology sector has attracted much attention from investors and analyst worldwide. However, our research shows that, apart from technology sector, firms in other sectors with higher level of digital transformation can also outperform the market and have stronger resilience during a crisis.”

The study has been accepted for publication by a reputable peer-reviewed journal Frontiers of Business Research in China.

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About the Singapore University of Social Sciences
SUSS is a university with a rich heritage in providing lifelong, learner-centric and industry-relevant education. Our mission is to champion lifelong education to develop future thinkers and leaders to their fullest potential through our 3H’s education philosophy – ‘Head’ for professional competency with applied knowledge, ‘Heart’ for social awareness of the needs of the society, and ‘Habit’ for passion towards lifelong learning.

We offer more than 70 undergraduate and graduate programmes, available in full- and part-time study modes which are flexible, modular and multi-faceted in learning experience to cater to both fresh school leavers and adult learners. We also launched a broad range of continuing education and training modular courses for the professional skills and knowledge upgrading of our workforce.

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