Modern pandemic crises and default risk: Worldwide evidence

Abstract

This article 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 article addresses the hitherto inadequacy of COVID‐related data. In addition, this article 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.

Growth Opportunities and Default Risk among Nonfinancial Firm Listed in Kenya

“…Firm-specific variables have been found to be good bankruptcy predictors (Kabir et al ., 2021;Ho et al, 2023; Nie, Ling & Chen, 2023; Atif, & Ali, 2021). Therefore, this study controls for several relevant firm characteristics that could affect default risk in the regression model: (1) Profitability, the ratio of net income to total assets; (2) Tangibility; the ratio of property plant and equipment (3) size, measured using the logarithm of total assets; (4) institutional ownership, the ratio of institutional ownership to total shareholding (5) leverage; the ratio of total debt to total assets.…”