Download This PaperModern Pandemic Crises and Default Risk: A Worldwide Evidence
Journal of International Financial Management and Accounting, forthcoming
48 Pages Posted: 27 Jan 2023 Last revised: 13 Apr 2023
Date Written: January 24, 2023
Abstract
This paper examines the relationship between modern health pandemic crises and financial stability. Specifically, it collects data on 250,223 firms in 43 countries (or regions) during five modern pandemic crises, SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014), and Zika (2016), and finds that pandemic crises significantly increase the default risk of enterprises. Further analysis shows that formal and informal institutions acted as a “cushion” against the pandemic crisis. The earlier a country adopts IFRS, the more unimpeded access to information, and the more stable religious and ethnic relations within the country can reduce the negative impact of a pandemic on financial stability. This paper addresses the hitherto inadequacy of COVID-related data. In addition, this paper argues that governments should build sound state institutions to withstand macroeconomic shocks and highlights the heterogeneity of default risk for enterprises operating in countries with different institutions.
Keywords: COVID-19, Pandemic crises, Default risk, Formal institution, Informal institution
JEL Classification: F39, G14, G33, M41
Suggested Citation: Suggested Citation