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Dursun-de Neef HÖ, Schandlbauer A, Wittig C. Countercyclical capital buffers and credit supply: Evidence from the COVID-19 crisis. JOURNAL OF BANKING & FINANCE 2023; 154:106930. [PMID: 37363102 PMCID: PMC10275778 DOI: 10.1016/j.jbankfin.2023.106930] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 05/31/2022] [Accepted: 06/11/2023] [Indexed: 06/28/2023]
Abstract
This paper examines how European banks adjusted their lending subsequent to the release of the countercyclical capital buffers (CCyB) during the COVID-19 pandemic. At its onset in 2020Q1, being exposed to a higher ex-ante countercyclical capital buffer led to a reduction in banks' lending. Yet the relief of the CCyBs removed this negative effect from 2020Q2 onwards. We find that the reduction in CCyBs led to a significant relative increase in the average bank's lending by about 5.6 percentage points of their total assets. This increase happened mainly in retail mortgage loans and was stronger for poorly-capitalized banks. These results imply that the release of the CCyBs was effective in promoting bank lending during the pandemic.
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Affiliation(s)
- H Özlem Dursun-de Neef
- Monash Business School, Monash University, 900 Dandenong Rd, Caulfield East VIC 3145, Australia
| | - Alexander Schandlbauer
- University of Southern Denmark and Danish Finance Institute, Campusvej 55, Odense 5230, Denmark
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2
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Tran DV, Bui DG, Nguyen C, Hoang HV. Bank liquidity hoarding during the COVID-19 pandemic. FINANCE RESEARCH LETTERS 2023; 55:104021. [PMID: 37305064 PMCID: PMC10201911 DOI: 10.1016/j.frl.2023.104021] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 11/23/2022] [Revised: 05/12/2023] [Accepted: 05/20/2023] [Indexed: 06/13/2023]
Abstract
This paper examines the association between bank liquidity hoarding (BLH) and the COVID-19 pandemic. Using a sample of U.S. banks and applying fixed effect estimators, we reveal that banks rack up liquidity assets and liabilities when the pandemic escalates. Our finding holds with alternative BLH and COVID-19 proxies and is further validated by falsification tests. Additional analysis reveals that BLH improves bank stability by reducing earnings volatility, non-performing loans and the propensity to go bankrupt. This study supports the existing literature on BLH and economic adversities and expands our understanding of BLH during the COVID-19 pandemic.
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Affiliation(s)
| | | | - Cuong Nguyen
- Lincoln University, New Zealand
- IPAG Business School, France
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3
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COVID-19 pandemic impact on banking sector: A cross-country analysis. JOURNAL OF MULTINATIONAL FINANCIAL MANAGEMENT 2023; 67:100784. [PMCID: PMC9896081 DOI: 10.1016/j.mulfin.2023.100784] [Citation(s) in RCA: 1] [Impact Index Per Article: 1.0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 07/16/2022] [Revised: 12/17/2022] [Accepted: 01/21/2023] [Indexed: 09/12/2023]
Abstract
This study examines the effects of the COVID-19 outbreak on the performance and stability of the banking sector. Our sample consists of 2073 banks in 106 countries from 2016Q1 to 2021Q2. We employ several alternative bank performance and stability measures for a comprehensive analysis and robustness. The findings show that the COVID-19 outbreak has significantly reduced bank performance and stability. These results are consistently observed across several geographical regions and countries’ income classifications. Additional analysis shows that the adverse impact of COVID-19 depends on the characteristics of the bank and market structure. While a better regulatory environment, institutional quality, and financial development have significantly increased the strength and resilience of banks. These findings provide practical implications for regulators and policymakers in the face of unprecedented uncertainty caused by the COVID-19 pandemic.
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4
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Bellucci A, Borisov A, Gucciardi G, Zazzaro A. The reallocation effects of COVID-19: Evidence from venture capital investments around the world. JOURNAL OF BANKING & FINANCE 2023; 147:106443. [PMID: 35221458 PMCID: PMC8856752 DOI: 10.1016/j.jbankfin.2022.106443] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 02/27/2021] [Accepted: 02/15/2022] [Indexed: 06/14/2023]
Abstract
We examine possible reallocation effects generated by the COVID-19 outbreak by analyzing the patterns of venture capital (VC) investments around the globe. Using transaction-level data and exploiting the staggered nature of the spread of the virus, we document a shift in VC portfolios towards firms developing technologies relevant to an environment of social distancing and health pandemic concerns. A difference-in-differences analysis estimates significant increases in invested amount and number of deals in such areas. We show heterogenous effects related to the experience of VC investors, as well as their size and organizational form.
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Affiliation(s)
- Andrea Bellucci
- Department of Economics, Università degli Studi dell'Insubria, European Commission, Joint Research Centre (JRC), and MoFiR. Address: Via Monte Generoso 71, 21100 Varese (VA), Italy
| | - Alexander Borisov
- Lindner College of Business, University of Cincinnati and MoFiR. Address: 2906 Woodside Drive, Cincinnati, OH 45221, USA
| | - Gianluca Gucciardi
- European Commission, Joint Research Centre (JRC). Address: Via E. Fermi, 2749, 21027 Ispra VA, Italy
| | - Alberto Zazzaro
- Department of Economics and Statistics, University of Naples Federico II, CSEF, and MoFiR. Address: Via Cintia, 21, 80126, Naples, Italy
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5
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Mateev M, Sahyouni A, Al Masaeid T. Bank performance before and during the COVID-19 crisis: Does efficiency play a role? REVIEW OF MANAGERIAL SCIENCE 2022. [DOI: 10.1007/s11846-022-00611-y] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 12/25/2022]
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6
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The outbreak of COVID-19 and stock market liquidity: Evidence from emerging and developed equity markets. THE NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE 2022; 62:101735. [PMCID: PMC9220867 DOI: 10.1016/j.najef.2022.101735] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.5] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 05/03/2021] [Revised: 06/07/2022] [Accepted: 06/14/2022] [Indexed: 06/17/2023]
Abstract
The outbreak of the novel corona virus has heightened concerns surrounding the adverse financial effects of the outbreak on stock market liquidity and economic policies. This paper contributes to the emerging strand of studies examining the adverse effects of the virus on varied aspect of global markets. The paper examines the causality and co-movements between COVID-19 and the aggregate stock market liquidity of China, Australia and the G7 countries (Canada, France, Italy, Japan, Germany, the UK and the US), using daily three liquidity proxies (Amihud, Spread and Traded Value) over the period December 2019 to July 2020. Our empirical analysis encompasses wavelet coherence and phase-differences as well as a linear Granger causality test. Linear causality test results suggest that a causal relationship exists between the number of cases of COVID 19 infections and stock market liquidity. To quantitatively examine the degree of causality between COVID-19 outbreak and stock market liquidity, we employ the continuous wavelet coherence approach with results revealing the unprecedented impact of COVID-19 on stock market liquidity during the low frequency bands for countries that were hard hit with the COVID-19 outbreak, i.e., Italy, Germany, France, the UK and the US. Further, evidence shows that there is a heterogeneous lead-lag nexus across scales for the entire period of the study.
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7
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Li S. COVID-19 and A-share banks' stock price volatility: From the perspective of the epidemic evolution in China and the US. GLOBAL FINANCE JOURNAL 2022; 54:100751. [PMID: 38013953 PMCID: PMC9236622 DOI: 10.1016/j.gfj.2022.100751] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 01/31/2022] [Revised: 06/15/2022] [Accepted: 06/24/2022] [Indexed: 11/29/2023]
Abstract
With a financial market dominated by indirect financing, China's banking system played a critical role in the government's response to COVID-19, which piqued our interest in the short-term impact of COVID-19 on the risk of China's banks. Examining the stock price of A-share listed banks and the number of confirmed cases in China and the US during the short time window surrounding the COVID-19 pandemic's outbreak, this study reveals that COVID-19 increased the A-share banking price volatility in both China and the US, reflecting a strong spillover effect of the US economic and financial system. Furthermore, COVID-19 in China has a smaller impact on the stock price volatility of China's state-owned banks (SOBs) than that of medium- and small-sized (M&S) banks, reflecting the higher risk resistance capability of large SOBs. Further analysis confirms that the impact primarily reflected systematic risk rather than idiosyncratic risk, as small and micro enterprises and M&S banks received more targeted financial support from the government. In contrast, large banks took on more responsibilities in the emergency financial stimulus, narrowing the idiosyncratic risk gap between the two types of banks and allowing the banking industry to better play its core role in the recovery of real economy in China. These findings will assist us in better understanding the effectiveness of financial assistance policies during the epidemic and will provide insights for future policymaking during similar crises.
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8
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Xiazi X, Shabir M. Coronavirus pandemic impact on bank performance. Front Psychol 2022; 13:1014009. [PMID: 36275237 PMCID: PMC9583902 DOI: 10.3389/fpsyg.2022.1014009] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Download PDF] [Journal Information] [Subscribe] [Scholar Register] [Received: 08/08/2022] [Accepted: 09/05/2022] [Indexed: 11/17/2022] Open
Abstract
This study examines the effects of the coronavirus (COVID-19) epidemic on the performance of the banking sector. Our sample consists of 1,575 banks in 85 countries from 2020Q1 to 2021Q4. The findings demonstrate that the COVID-19 outbreak has significantly decreased bank performance. Moreover, the adverse impact of COVID-19 on the bank's performance depends on the bank's and country-specific aspects. The adverse effect of the COVID-19 outbreak on bank performance is higher in smaller, undercapitalized, and less diversified banks. At the same time, a better institutional environment and financial development have significantly increased the strength and resilience of banks. The results are quite robust to using the alternative bank performance measures and estimation techniques. These findings provide practical implications for regulators and policymakers in the face of unprecedented uncertainty caused by COVID-19 epidemics.
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Affiliation(s)
- Xing Xiazi
- School of Economics, Shandong University of Finance and Economics (SDUFE), Jinan, Shandong, China
- Youth League Committee of Shandong University of Finance and Economics, (SDUFE), Jinan, Shandong, China
| | - Mohsin Shabir
- School of International Trade and Economics, Shandong University of Finance and Economics (SDUFE), Jinan, Shandong, China
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9
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Foreign to all but fluent in many: The effect of multinationality on shock resilience. JOURNAL OF WORLD BUSINESS 2022; 57:101370. [PMCID: PMC9286760 DOI: 10.1016/j.jwb.2022.101370] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.5] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 08/29/2021] [Revised: 07/05/2022] [Accepted: 07/06/2022] [Indexed: 11/12/2023]
Abstract
The sudden COVID-19 pandemic sent shockwaves through international markets. This paper studies the relation between multinationality and risk. While IB literature agrees that internationalization, in times of relative stability, increases systematic risk, we argue that internationalization also improves resilience against exogenous shocks. Leveraging the sequential COVID-waves as a unique empirical laboratory, we show that although multinationality causes liability of foreignness that increases systematic risk, it also generates an asset of multinationality that enhances shock resilience. Yet this advantage of internationalized firms gradually erodes as less internationalized firms learn about the shock and investors adapt their valuations to the post-shock reality.
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10
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Chen J, Cheng Z, Gong RK, Li J. Riding out the COVID-19 storm: How government policies affect SMEs in China. CHINA ECONOMIC REVIEW 2022; 75:101831. [PMID: 35821798 PMCID: PMC9264906 DOI: 10.1016/j.chieco.2022.101831] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 12/31/2021] [Revised: 04/21/2022] [Accepted: 06/30/2022] [Indexed: 06/15/2023]
Abstract
Based on a nationally representative survey on SMEs in China, we study the impact of government policy interventions on SMEs during the COVID-19 pandemic. Our findings are three-fold. First, relief policies in the form of payment deferrals and exemptions significantly improve SMEs' cash flows and further stimulate their operational recovery. This effect is more pronounced for firms with larger shares of high-skilled employees. Second, financial support policies do not appear to be effective in alleviating SMEs' cash constraints or encouraging the reopening of small businesses, potentially due to difficulties in accessing policy-oriented loans and misallocation of credit. Last, regional and local lock-down policies decrease SMEs' incidence of reopening and delay their expected reopening in the near future, likely by reducing consumer demand. Our findings shed new light on the policy debates on supporting SMEs during the COVID-19 pandemic.
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Affiliation(s)
- Joy Chen
- Cheung Kong Graduate School of Business, China
| | - Zijun Cheng
- Guanghua School of Management, Peking University, China
- Center for Enterprise Research, Peking University, China
| | - Robin Kaiji Gong
- Department of Economics, School of Business and Management, The Hong Kong University of Science and Technology, China
| | - Jinlin Li
- Center for Enterprise Research, Peking University, China
- Harvard Kennedy School, Harvard University, USA
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11
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Gopalakrishnan B, Jacob J, Mohapatra S. COVID-19 pandemic and debt financing by firms: Unravelling the channels. ECONOMIC MODELLING 2022; 114:105929. [PMID: 35765417 PMCID: PMC9221743 DOI: 10.1016/j.econmod.2022.105929] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 04/27/2021] [Revised: 06/05/2022] [Accepted: 06/06/2022] [Indexed: 06/15/2023]
Abstract
The COVID-19-induced disruptions and the consequent government responses stretched the financial resources of firms. Recent studies document an increase in debt financing by firms during the pandemic. Using firm-level data from 61 countries, we deepen the understanding of the impact of the pandemic by examining the variation in loan and bond financing attributable to COVID-19-specific factors. Indicative of heightened precautionary needs, firms with higher pandemic exposure and those located in countries with stringent lockdowns have a higher propensity to raise debt. Furthermore, firms in industries less amenable to remote working also have a higher propensity to raise debt, but face higher financing costs compared to their peers. Reflective of opportunistic investment motives, firms that hold a relatively positive outlook have a greater likelihood of raising loan financing. The findings draw attention to the role of real-side factors and managerial motives that drive debt financing during a distress episode.
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Affiliation(s)
- Balagopal Gopalakrishnan
- Finance and Accounting Department, Indian Institute of Management Ahmedabad, Gujarat, 380015, India
| | - Joshy Jacob
- Finance and Accounting Department, Indian Institute of Management Ahmedabad, Gujarat, 380015, India
| | - Sanket Mohapatra
- Economics Department, Indian Institute of Management Ahmedabad, Gujarat, 380015, India
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12
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Dursun-de Neef HÖ, Schandlbauer A. COVID-19, bank deposits, and lending. JOURNAL OF EMPIRICAL FINANCE 2022; 68:20-33. [PMID: 35993089 PMCID: PMC9378067 DOI: 10.1016/j.jempfin.2022.05.003] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 04/06/2021] [Revised: 05/20/2022] [Accepted: 05/26/2022] [Indexed: 06/15/2023]
Abstract
During the pandemic, households accumulated savings in their deposit accounts as a result of a reduction in their spending, which occurred due to the restrictions on their mobility. This led to a significant increase in bank deposits for banks located in counties with a larger reduction in spending. Banks, in turn, used these additional funds to issue more real estate loans. This implies that policies that might affect household spending would lead to changes in the volume of deposits in the banking system, which have consequences on banks' loan supply.
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Affiliation(s)
- H Özlem Dursun-de Neef
- Goethe University Frankfurt, Theodor-W.-Adorno-Platz 3, 60629 Frankfurt am Main, Germany
| | - Alexander Schandlbauer
- University of Southern Denmark and Danish Finance Institute, Campusvej 55, 5230 Odense, Denmark
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13
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Mansilla-Fernández JM, Milgram-Baleix J. Working capital management, financial constraints and exports: evidence from European and US manufacturers. EMPIRICAL ECONOMICS 2022; 64:1769-1810. [PMID: 36034740 PMCID: PMC9396623 DOI: 10.1007/s00181-022-02295-5] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Grants] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 11/23/2020] [Accepted: 07/28/2022] [Indexed: 06/15/2023]
Abstract
This paper investigates the effect of firms' working capital management, measured by the cash conversion cycle (CCC) on exports, on both the intensive and extensive margins. By using Heckman's two-stage model for the treatment of sample selection bias, we find that the longer the CCC, the lower firms' likelihood of exporting and the lower the volume of their exports. This phenomenon is economically more relevant for financially constrained firms than for unconstrained firms. The results are robust to the propensity score matching, the transition sample and the placebo analyses. Finally, these results can be extrapolated in the context of the COVID-19 crisis because of the decline in trading conditions and firms' shortage of liquidity.
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Affiliation(s)
- José Manuel Mansilla-Fernández
- Department of Business Management and Institute for Advanced Research in Business and Economics (INARBE), Public University of Navarre (UPNA), Arrosadia Campus, 31006 Pamplona, Navarre Spain
| | - Juliette Milgram-Baleix
- Department of Economics Theory and Economic History, University of Granada, Campus Universitario de Cartuja, 10587 Granada, Granada Spain
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14
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Arianpoor A, Naeimi Tajdar SS. The relationship between firm risk, capital structure, cost of equity capital, and social and environmental sustainability during the COVID-19 pandemic. JOURNAL OF FACILITIES MANAGEMENT 2022. [DOI: 10.1108/jfm-11-2021-0148] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.5] [Reference Citation Analysis] [Abstract] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 11/17/2022]
Abstract
Purpose
This study aims to explore the relationship between firm risk, capital structure, cost of equity capital and social and environmental sustainability during the COVID-19 pandemic for companies listed on Tehran Stock Exchange.
Design/methodology/approach
To this aim, the information about 190 companies in 2014–2020 was retrieved to be analyzed. The total risk and systematic risk were used as the indicators of company risk; the industry-adjusted earnings price ratio (IndEP) and GORDON were used for the cost of equity capital. To measure social sustainability and environmental sustainability, the procedure suggested by Arianpoor and Salehi (2020) was used.
Findings
Underleveraged firms have had a lower total risk during the COVID-19 pandemic, while overleveraged firms have not had a higher risk during this time. In overleveraged firms, using systematic risk has a negative impact on social sustainability during the COVID-19 pandemic. In overleveraged firms, using total risk and systematic risk has a significant negative impact on environmental sustainability in the pandemic. Besides, overleveraged firms have a lower cost of equity capital (IndEP) during COVID-19.
Originality/value
To the best of the authors’ knowledge, no similar study has so far examined the joint impact of COVID-19 and corporate risk on social and environmental sustainability and also the joint impact of COVID-19 and capital structure on the cost of equity. This study contributes to the related literature by providing corporations with insightful post-pandemic directions on capital structure decisions and social and environmental activities. Furthermore, this research and the relevant findings can help understand and develop social responsibility in Iran as a developing country.
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Bai M, Ho L. Corporate social performance and firm debt levels: Impacts of the covid-19 pandemic and institutional environments. FINANCE RESEARCH LETTERS 2022; 47:102968. [PMID: 35578609 PMCID: PMC9093158 DOI: 10.1016/j.frl.2022.102968] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 11/17/2021] [Revised: 04/17/2022] [Accepted: 05/10/2022] [Indexed: 06/15/2023]
Abstract
This paper examines the relation between corporate social performance (CSP) and firm debt levels and explores the channels between them by focusing on the ongoing health crisis, the COVID-19 pandemic. We use a large sample of public firms from 31 countries between 2002 and 2020. Employing pooled ordinary least squared and firm fixed effects models, after controlling for endogeneity and sample selection bias, we find that during the pre-COVID economic condition, CSP has a significantly positive impact on firm debt levels by reducing financial constraints and enhancing stakeholder engagement. However, during the outbreak, CSP becomes costlier and reveals more managerial agency problems for firms that make such associations attenuated. Furthermore, our evidence suggests that in countries with better institutional environments, the CSP-firm debt levels relation is less pronounced. These results have several implications in terms of investment and capital structure decisions.
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Affiliation(s)
- Min Bai
- School of Accounting, Finance and Economics, Waikato Management School, University of Waikato, New Zealand
| | - Ly Ho
- University of Economics, The University of Danang, Viet Nam
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Zhang D, Sogn-Grundvåg G. Credit constraints and the severity of COVID-19 impact: Empirical evidence from enterprise surveys. ECONOMIC ANALYSIS AND POLICY 2022; 74:337-349. [PMID: 35281616 PMCID: PMC8902894 DOI: 10.1016/j.eap.2022.03.005] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.5] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 03/18/2021] [Revised: 05/20/2021] [Accepted: 03/01/2022] [Indexed: 05/29/2023]
Abstract
The COVID-19 pandemic decreases firm revenue and raises the demand for liquidity, resulting in increased financial stress for firms throughout the world. In attempts to mitigate the impact of the COVID-19 crisis, governments have established a range of credit programs to provide credit to firms with poor liquidity. However, the efficacy of those relief programs has been low, and the relief funds do not reach the businesses most in need of liquidity injection, indicating a need to identify firms that are the most vulnerable during the crisis. We first combine the standard Enterprises Surveys and the follow-up surveys on the economic consequences of the COVID-19 pandemic. The sample firms are used to test how credit constraint conditions and firm characteristics affect the severity of the COVID-19 impact on firm performance. Our empirical results indicate that small firms and firms with limited access to finance are more likely to be severely affected by the crisis. Firms with foreign ownership and that are located in small cities are less at-risk. Compared to the 2008 Global Financial Crisis, COVID-19 less severely affects credit-constrained firms and foreign-owned firms and more severely affects small and medium-sized enterprises (SMEs).
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Affiliation(s)
- Dengjun Zhang
- Business School, University of Stavanger, N-4036, Stavanger, Norway
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17
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Stef N, Bissieux JJ. Resolution of corporate insolvency during COVID-19 pandemic. Evidence from France. INTERNATIONAL REVIEW OF LAW AND ECONOMICS 2022; 70:106063. [PMID: 35261416 PMCID: PMC8893952 DOI: 10.1016/j.irle.2022.106063] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 09/03/2021] [Revised: 01/30/2022] [Accepted: 03/01/2022] [Indexed: 06/14/2023]
Abstract
We investigate how the lockdown enforcement by French authorities is associated with the resolution of corporate insolvency. In this sense, we make a distinction between four legal procedures, namely the amicable liquidation (out-of-court exit), the judicial liquidation (court-driven exit), the restructuring procedure available to non-defaulted firms, and the restructuring procedure available to defaulted firms. Using a sample of 3488 non-listed and non-financial French firms, our estimates yield three major findings. First, the likelihood of judicial liquidation increased after the lifting of the quarantines compared to the pre-pandemic period. Second, the non-defaulted firms had a higher likelihood to reorganize in court during the second lockdown. Third, the lifting of the first lockdown led to a decrease in the probability of restructuring the assets of defaulted firms. Although the main objective of the lockdown was to limit spread of the virus, its enforcement has not encouraged the use of the out-of-court exit path.
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Affiliation(s)
- Nicolae Stef
- CEREN EA 7477, Burgundy School of Business, Université Bourgogne Franche-Comté, Department of Accounting, Finance & Law, Dijon, France
| | - Jean-Joachim Bissieux
- Maître Jean-Joachim BISSIEUX Mandataire Judiciaire, 2B avenue de Marbotte Immeuble "Marbotte Plaza", BP 57970, 21079 Dijon, France
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18
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Alabbad A, Schertler A. COVID-19 and bank performance in dual-banking countries: an empirical analysis. JOURNAL OF BUSINESS ECONOMICS 2022; 92:1511-1557. [PMID: 38013977 PMCID: PMC9069428 DOI: 10.1007/s11573-022-01093-w] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Grants] [Track Full Text] [Download PDF] [Figures] [Subscribe] [Scholar Register] [Accepted: 03/25/2022] [Indexed: 11/25/2022]
Abstract
We explore how banks' income and stock prices respond to the COVID-19 policy measures in countries with the dual-banking system, and whether Islamic banks over- or underperform compared to conventional banks. Applying two-way fixed-effect regressions, we document that the changes in Islamic banks' finance income as well as net income decline as much during the COVID-19 pandemic as the changes in interest and net income of conventional banks. Event-study tests show that the stock prices of Islamic banks respond as negatively as the ones of conventional banks to workplace closures. We do, however, document that the two types of banks respond differently to income support schemes. The change in Islamic banks' finance income and net income increase significantly more compared to that of their conventional peers when governments install income support initiatives. Also, Islamic banks' stock prices respond more positively to the income support programs than the ones of conventional banks. Because we control for investment banking activities and services to large clients, our findings on the stronger response of Islamic banks to income support programs seem to result from Islamic banks' focus on private customers who are supported during the pandemic. Overall, we conclude that the Shariah compliance does not limit the adverse impact of the COVID-19 crisis on Islamic banking, but that Islamic banks' performance responds more positively to income support initiatives than the one of conventional banks.
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Affiliation(s)
- Amal Alabbad
- LaPenta School of Business, Iona College, 715 North Avenue, New Rochelle, NY 10801 USA
| | - Andrea Schertler
- School of Business, Economics and Social Sciences, University of Graz, Universitätsstr. 15, 8010 Graz, Austria
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19
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Baig AS, Chen M. Did the COVID-19 pandemic (really) positively impact the IPO Market? An Analysis of information uncertainty. FINANCE RESEARCH LETTERS 2022; 46:102372. [PMID: 35431676 PMCID: PMC8995510 DOI: 10.1016/j.frl.2021.102372] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.5] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 07/12/2021] [Revised: 08/03/2021] [Accepted: 08/09/2021] [Indexed: 05/23/2023]
Abstract
Anecdotal evidence seems to suggest that the initial public offering (IPO) market performed remarkably well through the COVID-19 pandemic. To further understand this peculiar observation, we carry out a comprehensive analysis of IPOs during the pandemic vis-a-vis IPOs before the pandemic. Our findings imply that IPOs during the pandemic experience greater information uncertainty compared to those before the pandemic, and this greater uncertainty is mainly driven by the IPOs from the high-technology and the healthcare sectors. Furthermore, we find that an average IPO firm experiences larger underpricing and more post-IPO return volatility as the pandemic and the associated government responses increase in severity before the offering. Overall, our study indicates that the COVID-19 pandemic had an adverse impact on the IPO market.
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Affiliation(s)
- Ahmed S Baig
- Department of Finance, College of Business and Economics, Boise State University, Boise, ID 83725, United States
| | - Mengxi Chen
- Department of Finance, School of Business, Central Connecticut State University, New Britain, CT 06050, United States
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20
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Tan LP, Sadiq M, Aldeehani TM, Ehsanullah S, Mutira P, Vu HM. How COVID-19 induced panic on stock price and green finance markets: global economic recovery nexus from volatility dynamics. ENVIRONMENTAL SCIENCE AND POLLUTION RESEARCH INTERNATIONAL 2022; 29:26322-26335. [PMID: 34853996 PMCID: PMC8635325 DOI: 10.1007/s11356-021-17774-y] [Citation(s) in RCA: 6] [Impact Index Per Article: 3.0] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 10/08/2021] [Accepted: 11/23/2021] [Indexed: 05/14/2023]
Abstract
This paper investigates the effect of different categories of essential COVID-19 data from 2020 to 2021 towards stock price dynamics and options markets. It applied the hypothetical method in which investors develop depression based on the understanding suggested by various green finance divisions. Furthermore, additional elements like panic, sentiment, and social networking sites may impact the attitude, size, and direction of green finance, subsequently impacting the security prices. We created new emotion proxies based on five groups of information, namely COVID-19, marketplace, lockdown, banking sector, and government relief using Google search data. The results show that (1) if the proportional number of traders' conduct exceeds the stock market, the effect of sentimentality indexes on jump volatility is expected to change; (2) the volatility index component jump radically increases with the COVID-19 index, city and market lockdown index, and banking index; and (3) expanding the COVID-19 index gives rise to the stock market index. Moreover, all indexes decreased in jump volatility but only after 5 days. These findings comply with the hypotheses proposed by our model.
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Affiliation(s)
| | - Muhammad Sadiq
- Faculty of Business and Law, School of Accounting and Finance, Taylor’s University Malaysia, Subang Jaya, Malaysia
| | - Talla M. Aldeehani
- College of Business Administration, Kuwait University, Kuwait City, Kuwait
| | - Syed Ehsanullah
- School of Accountancy, Universiti Utara Malaysia, Changlun, Malaysia
| | - Putri Mutira
- Universitas Pembangunan Jaya, South Tangerang, Indonesia
| | - Hieu Minh Vu
- Faculty of Business Administration, Van Lang University, 69/68 Dang Thuy Tram Street, Ward 13, Binh Thanh District, Ho Chi Minh City, Vietnam
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21
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Tampakoudis I, Noulas A, Kiosses N. The market reaction to syndicated loan announcements before and during the COVID-19 pandemic and the role of corporate governance. RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE 2022; 60:101602. [PMID: 34975188 PMCID: PMC8704733 DOI: 10.1016/j.ribaf.2021.101602] [Citation(s) in RCA: 2] [Impact Index Per Article: 1.0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 12/31/2020] [Revised: 11/11/2021] [Accepted: 12/19/2021] [Indexed: 06/14/2023]
Abstract
This study examines the wealth effects of syndicated loan announcements before and after the onset of the COVID-19 outbreak. Using a sample of 637 loan announcements by European borrowers, we find significantly higher wealth gains during the pandemic compared to the pre-pandemic period. The results suggest that the certification of multiple lenders loans conveys a positive signal for the borrowers' creditworthiness during the pandemic-driven economic meltdown. We further show that certain corporate governance mechanisms, such as board size, gender diversity, and CEO duality and compensation, are related differently to borrowers' excess returns before and after the COVID-19 pandemic. The results are robust to alternative model specifications that control for different estimation models and event windows. They also hold after addressing self-selection bias.
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Affiliation(s)
| | - Athanasios Noulas
- Department of Accounting and Finance, University of Macedonia, Greece
| | - Nikolaos Kiosses
- Department of Accounting and Finance, University of Macedonia, Greece
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22
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Moslehpour M, Al-Fadly A, Ehsanullah S, Chong KW, Xuyen NTM, Tan LP. Assessing Financial Risk Spillover and Panic Impact of Covid-19 on European and Vietnam Stock market. ENVIRONMENTAL SCIENCE AND POLLUTION RESEARCH INTERNATIONAL 2022; 29:28226-28240. [PMID: 34993822 PMCID: PMC8736318 DOI: 10.1007/s11356-021-18170-2] [Citation(s) in RCA: 3] [Impact Index Per Article: 1.5] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 11/19/2021] [Accepted: 12/13/2021] [Indexed: 05/23/2023]
Abstract
This study examined the influence of tail risks on global financial markets, which aids in better understanding of the emergence of COVID-19. This study looks at the global and Vietnamese stock markets impacted by the COVID-19 pandemic to identify systemic emergencies. Risk dependent value (CoVaR) and Delta link VaR are two important tail-related risk indicators used in Conditional Bivariate Dynamic Correlation (DCC) (CoVaR). The empirical findings demonstrate that when COVID-19's worldwide spread widens, the volatility transmission of systemic risks across the global stock market and multiple exchanges shifts and becomes more relevant over time. At the time of COVID-19, the world industrial market was larger than the Vietnamese stock market, and the Vietnamese stock market posed a lesser danger to the global market. A closer examination of the link between the Vietnam value-at-risk (VaR) range index sample and the world stock index indicates a significant degree of downside risk integration in key monetary systems, particularly during the COVID-19 era. Our study findings may help regulators, politicians, and portfolio risk managers in Vietnam and worldwide during the unique moment of uncertainty created by the COVID-19 epidemic.
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Affiliation(s)
- Massoud Moslehpour
- Department of Business Administration, Asia University, 500, Lioufeng Rd., Wufeng, Taichung, 41354 Taiwan
- Department of Management, California State University, San Bernardino 5500, University Parkway, San Bernardino, CA 92407 USA
| | - Ahmad Al-Fadly
- Gulf University for Science & Technology, Mubarak Al-Abdullah, Kuwait
| | | | - Kwong Wing Chong
- School of Professional Studies, Taylor’s College, Taylor’s Lakeside Campus, No. 1 Jalan Taylor’s, 47500 Subang Jaya, Selangor Malaysia
| | - Nguyen Thi My Xuyen
- Faculty of Business Administration, Van Lang University, 69/68 Dang Thuy Tram, Ward 13, Binh Thanh Dist., Ho Chi Minh City, Vietnam
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23
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John K, Li J. COVID-19, volatility dynamics, and sentiment trading. JOURNAL OF BANKING & FINANCE 2021; 133:106162. [PMID: 34785857 PMCID: PMC8579745 DOI: 10.1016/j.jbankfin.2021.106162] [Citation(s) in RCA: 4] [Impact Index Per Article: 1.3] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 10/16/2020] [Accepted: 04/23/2021] [Indexed: 05/13/2023]
Abstract
In this paper, we study how different categories of crucial COVID-19 information influence price dynamics in stock and option markets during the period from 01/21/20 to 01/31/21. We present a theoretical model in which the behavioral traders make perceptual errors based on the intensity of sentiment arising from different types of news. In addition to the magnitude and direction of the news and its payoff relevance to security prices, other factors such as fear, emotion, and social media can influence the sentiment level. Using Google search data, we construct novel proxies for the sentiment levels induced by five categories of news, COVID, Market, Lockdown, Banking, and Government relief efforts. If the relative presence of behavioral traders in the stock market exceeds that in the option market, different predictions obtain for the effect of sentiment indices on jump volatility of the VIX index, the S&P 500 index, and the S&P 500 Banks index. We find that the jump component in the VIX index is increasing significantly with COVID index, Market index, Lockdown index, and Banking index. However, only COVID index and Market index increase the jump component of realized volatility of the stock indices (S&P 500 index and S&P 500 Banks index). The Government relief efforts index decreases this jump component. Banking and Lockdown index reduce jump volatility in the S&P 500 index and S&P 500 Banks index, but only with a delay of 5 days. These results are consistent with the predictions of our model.
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Affiliation(s)
- Kose John
- Leonard N. Stern School of Business, New York University, USA
| | - Jingrui Li
- A. B. Freeman School of Business, Tulane University, USA
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24
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Karakaplan MU. This time is really different: The multiplier effect of the Paycheck Protection Program (PPP) on small business bank loans. JOURNAL OF BANKING & FINANCE 2021; 133:106223. [PMID: 34898822 PMCID: PMC8653387 DOI: 10.1016/j.jbankfin.2021.106223] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.3] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 10/15/2020] [Accepted: 06/19/2021] [Indexed: 05/13/2023]
Abstract
In response to the COVID-19 crisis, the U.S. government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020, creating the Paycheck Protection Program (PPP), among others, to aid small businesses and their employees. Most PPP loans were administered by commercial banks in return for fees, and the banks bore little monitoring costs or risks, since PPP loans were forgivable by the government. I analyze if PPP loans of up to $1 million were net substitutes or complements for conventional small business loans of the same size for the PPP-issuing banks. The $1 million upper bound roughly corresponds to credits to the smallest firms that are often financially constrained. Using Call Report data through 2020:Q4, I find significant net complementarities. An additional dollar of PPP credit of up to $1 million had multiplier effects on conventional loans to the smallest firms of about an extra dollar.
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Affiliation(s)
- Mustafa U Karakaplan
- Department of Finance, Darla Moore School of Business, University of South Carolina, 1014 Greene Street, Columbia, SC 29208, USA
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25
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Hasan I, Politsidis PN, Sharma Z. Global syndicated lending during the COVID-19 pandemic. JOURNAL OF BANKING & FINANCE 2021; 133:106121. [PMID: 35185267 PMCID: PMC8843416 DOI: 10.1016/j.jbankfin.2021.106121] [Citation(s) in RCA: 8] [Impact Index Per Article: 2.7] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 10/14/2020] [Accepted: 03/13/2021] [Indexed: 05/22/2023]
Abstract
This paper examines the pricing of global syndicated loans during the COVID-19 pandemic. We find that loan spreads rise by over 11 basis points in response to a one standard deviation increase in the lender's exposure to COVID-19 and over 5 basis points for an equivalent increase in the borrower's exposure. This implies excess interestof about USD 5.16 million and USD 2.37 million respectively for a loan of average size and duration. The aggravating effect of the pandemic is exacerbated with the level of government restrictions to tackle the virus's spread, with firms' financial constraints and reliance on debt financing, whereas it is mitigated for relationship borrowers, borrowers listed in multiple exchanges or headquartered in countries that can attract institutional investors.
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Affiliation(s)
- Iftekhar Hasan
- Fordham University, Bank of Finland and the University of Sydney, 45 Columbus Avenue, New York, NY 10023
| | | | - Zenu Sharma
- The Peter J Tobin School of Business, St John's University, 8000 Utopia Pkwy, New York, NY
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26
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Abstract
Despite the devastating worldwide human and economic tolls of the COVID-19 crisis, it has created some positive economic and financial surprises and opportunities for research. This paper highlights two such favorable surprises – the shortest U.S. recession on record and the avoidance of any banking crisis – and a number of research opportunities. The paper ties the “economic surprise” of the short recession to the speed and size of U.S. stimulus programs during COVID-19 – faster and larger than for the Global Financial Crisis (GFC). We connect the “financial surprise” of the resilient banking sector to prudential policies put in place during and after the GFC that fortified U.S. banks prior to COVID-19. These twin “surprises” are also mutually reinforcing – if either the economy or banking system had failed, so would the other. The paper also reviews extant COVID-19 banking research and suggest paths for future research. It recommends that particular attention be paid to research outside of the U.S. – where fewer favorable “surprises” may be present – as the best way to advance knowledge in this area.
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27
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Özlem Dursun-de Neef H, Schandlbauer A. COVID-19 and lending responses of European banks. JOURNAL OF BANKING & FINANCE 2021; 133:106236. [PMID: 34785858 PMCID: PMC8579739 DOI: 10.1016/j.jbankfin.2021.106236] [Citation(s) in RCA: 3] [Impact Index Per Article: 1.0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 10/14/2020] [Accepted: 06/26/2021] [Indexed: 06/13/2023]
Abstract
This paper examines how European banks adjusted lending at the onset of the pandemic depending on their local exposure to the COVID-19 outbreak and capitalization. Using a bank-level COVID-19 exposure measure, we show that higher exposure to COVID-19 led to a relative increase in worse-capitalized banks' loans whereas their better-capitalized peers decreased their lending more. At the same time, only better-capitalized banks experienced a significantly larger increase in their delinquent and restructured loans. These findings are in line with the zombie lending literature that banks with low capital have an incentive to issue more loans during contraction times to help their weaker borrowers so that they can avoid loan loss recognition and write-offs on their capital.
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Affiliation(s)
- H Özlem Dursun-de Neef
- Goethe University Frankfurt, Theodor-W.-Adorno-Platz 3, Frankfurt am Main 60629, Germany
| | - Alexander Schandlbauer
- University of Southern Denmark and Danish Finance Institute, Campusvej 55, Odense 5230, Denmark
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28
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Duan Y, El Ghoul S, Guedhami O, Li H, Li X. Bank systemic risk around COVID-19: A cross-country analysis. JOURNAL OF BANKING & FINANCE 2021; 133:106299. [PMID: 34548746 PMCID: PMC8445904 DOI: 10.1016/j.jbankfin.2021.106299] [Citation(s) in RCA: 5] [Impact Index Per Article: 1.7] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 10/16/2020] [Accepted: 08/19/2021] [Indexed: 05/05/2023]
Abstract
Using 1,584 listed banks from 64 countries during the COVID-19 pandemic, we conduct the first broad-based international study of the effect of the pandemic on bank systemic risk. We find the pandemic has increased systemic risk across countries. The effect operates through government policy response and bank default risk channels. Additional analysis suggests that the adverse effect on systemic stability is more pronounced for large, highly leveraged, riskier, high loan-to-asset, undercapitalized, and low network centrality banks. However, this effect is moderated by formal bank regulation (e.g., deposit insurance), ownership structure (e.g., foreign and government ownership), and informal institutions (e.g., culture and trust).
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Affiliation(s)
- Yuejiao Duan
- School of Finance, Nankai University, 38 Tongyan Road, Jinnan District, Tianjin 300350, PR China
| | | | | | - Haoran Li
- School of Economics and Management, Tsinghua University
| | - Xinming Li
- School of Finance, Nankai University, 38 Tongyan Road, Jinnan District, Tianjin 300350, PR China
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29
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Feyen E, Alonso Gispert T, Kliatskova T, Mare DS. Financial Sector Policy Response to COVID-19 in Emerging Markets and Developing Economies. JOURNAL OF BANKING & FINANCE 2021; 133:106184. [PMID: 34898821 PMCID: PMC8653394 DOI: 10.1016/j.jbankfin.2021.106184] [Citation(s) in RCA: 7] [Impact Index Per Article: 2.3] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 10/15/2020] [Accepted: 05/16/2021] [Indexed: 05/22/2023]
Abstract
This paper introduces a new global database and a policy classification framework that records the financial sector policy response to the COVID-19 pandemic across 155 jurisdictions and over time. It documents that authorities around the world have taken a diverse array of measures to mitigate financial distress in the markets and for borrowers, and to support the provision of critical financial services to the real economy. Using Cox proportional hazards and Poisson regressions, the paper takes initial steps to analyze the determinants of policy makers' responsiveness and activity in emerging markets and developing economies, respectively. The results indicate that policy makers in richer and more populous countries have been significantly more responsive and have taken more policy measures. Belonging to a monetary union is also significantly associated with a faster and more frequent intervention. Countries with higher private debt levels tend to respond earlier with banking sector and liquidity and funding measures. The spread of COVID-19, macro-financial fundamentals, pressure on foreign exchange markets, political settings, and fiscal and containment policies appear to play a limited role in determining policy response. In a substantially smaller sample, the paper explores the role of banking sector characteristics and finds that emerging markets and developing economies with higher private bank credit to GDP and that have adopted Basel III reforms have taken fewer policy measures.
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30
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Zhu X, Ao X, Qin Z, Chang Y, Liu Y, He Q, Li J. Intelligent financial fraud detection practices in post-pandemic era. Innovation (N Y) 2021; 2:100176. [PMID: 34806059 PMCID: PMC8581570 DOI: 10.1016/j.xinn.2021.100176] [Citation(s) in RCA: 19] [Impact Index Per Article: 6.3] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Download PDF] [Figures] [Journal Information] [Subscribe] [Scholar Register] [Received: 05/20/2021] [Accepted: 10/18/2021] [Indexed: 11/26/2022] Open
Abstract
The great losses caused by financial fraud have attracted continuous attention from academia, industry, and regulatory agencies. More concerning, the ongoing coronavirus pandemic (COVID-19) unexpectedly shocks the global financial system and accelerates the use of digital financial services, which brings new challenges in effective financial fraud detection. This paper provides a comprehensive overview of intelligent financial fraud detection practices. We analyze the new features of fraud risk caused by the pandemic and review the development of data types used in fraud detection practices from quantitative tabular data to various unstructured data. The evolution of methods in financial fraud detection is summarized, and the emerging Graph Neural Network methods in the post-pandemic era are discussed in particular. Finally, some of the key challenges and potential directions are proposed to provide inspiring information on intelligent financial fraud detection in the future. Financial fraud in the post-pandemic era is becoming more sophisticated and insidious We reiew the development of financial fraud detection from data and method perspectives Graph neural network methods are emphasized due to their capacity for heterogeneous data analysis Future directions of financial fraud detection are discussed from task, data, and model-oriented perspectives
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Affiliation(s)
- Xiaoqian Zhu
- School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China.,Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China
| | - Xiang Ao
- Key Lab of Intelligent Information Processing of Chinese Academy of Sciences (CAS), Institute of Computing Technology, CAS, Beijing 100190, China.,School of Computer Science and Technology, University of Chinese Academy of Sciences, Beijing 100049, China.,Institute of Intelligent Computing Technology, Suzhou, CAS
| | - Zidi Qin
- Key Lab of Intelligent Information Processing of Chinese Academy of Sciences (CAS), Institute of Computing Technology, CAS, Beijing 100190, China.,School of Computer Science and Technology, University of Chinese Academy of Sciences, Beijing 100049, China
| | - Yanpeng Chang
- Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China.,School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China
| | - Yang Liu
- Key Lab of Intelligent Information Processing of Chinese Academy of Sciences (CAS), Institute of Computing Technology, CAS, Beijing 100190, China.,School of Computer Science and Technology, University of Chinese Academy of Sciences, Beijing 100049, China
| | - Qing He
- Key Lab of Intelligent Information Processing of Chinese Academy of Sciences (CAS), Institute of Computing Technology, CAS, Beijing 100190, China.,School of Computer Science and Technology, University of Chinese Academy of Sciences, Beijing 100049, China
| | - Jianping Li
- School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China
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31
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Chu X. A comparison of coupled microeconomic and mental health devastating alterations between low-income and affluent countries afflicted with COVID-19. Work 2021; 70:733-749. [PMID: 34719457 DOI: 10.3233/wor-210191] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 11/15/2022] Open
Abstract
BACKGROUND The exponential increase in the rate of individuals' affliction by SARS-CoV-2 (COVID-19) has put extreme strains on health care systems worldwide and has sparked fears of an impending economic recession and mental turmoil. OBJECTIVE The review discusses the impact of COVID-19 on medical crises in two sections, focusing on the evidence presented from both neuropathological and epidemiological perspectives. First, this paper outlines how countries have implemented containment and appraises its effect on the microeconomy. Second, it highlights how government support for the economic crisis caused by COVID-19 depends on the size of a country's economy. Third, it attempts to explain how COVID-19 has affected business by explicitly evaluating each industry divided into primary, secondary, and tertiary sectors. Finally, we assert an extended discussion on the challenges and post-pandemic outlook. METHODS Peer-reviewed studies from inception until 2021 were searched in the Google scholar, PubMed, and Scopus databases. RESULTS Through the imposition of restrictions and lockdown measures to contain the COVID-19 pandemic spread, besides arising a broad array of mental health concerns, a drastic drop in liquidity and significant spillover effect across almost all the global economic system has ensued. CONCLUSION The COVID-19 implication on socioeconomic issues and mental wellbeing, as the most devastating sequelae of the current pandemic, is of great importance to curb the infection and deprive post-pandemic sequelae, demanding prompt actions.
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Affiliation(s)
- Xinxin Chu
- Department of Economics, The University of Sheffield, Sheffield, UK E-mail:
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32
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Cumming DJ, Martinez-Salgueiro A, Reardon RS, Sewaid A. COVID-19 bust, policy response, and rebound: equity crowdfunding and P2P versus banks. JOURNAL OF TECHNOLOGY TRANSFER 2021; 47:1825-1846. [PMID: 34690426 PMCID: PMC8520110 DOI: 10.1007/s10961-021-09899-6] [Citation(s) in RCA: 5] [Impact Index Per Article: 1.7] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Download PDF] [Figures] [Journal Information] [Subscribe] [Scholar Register] [Accepted: 09/29/2021] [Indexed: 11/28/2022]
Abstract
Traditional intermediaries have the ability and the incentive to intertemporarily smooth outcomes. Fintechs, such as peer-to-peer (P2P) lending platforms and equity crowdfunding (ECF) platforms, enable riskier projects without regard to intertemporal smoothing. U.S. data from May 2016 to June 2020 show that COVID-19 had an adverse impact on bank consumer lending. However, counter to our expectations, ECF and P2P are much more stable, timely, and resilient in the COVID-19 crisis compared to bank consumer lending. Moreover, the data indicate that P2P lending is a leading indicator for bank consumer lending and that bank consumer lending substitutes ECF. The policy response—CARES Act—caused: (1) a significant increase in ECF volumes, (2) a substantial rebound to bank consumer lending, and iii) at best, neutralized an already-stabilized level of P2P lending.
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Affiliation(s)
- Douglas J. Cumming
- College of Business, Florida Atlantic University, 777 Glades Road, Boca Raton, FL 33431 USA
- Birmingham Business School, University of Birmingham, University House, 116 Edgbaston Park Rd, Birmingham, B15 2TY United Kingdom
| | - Andrea Martinez-Salgueiro
- Faculty of Economics and Business, University of Santiago de Compostela, Avenida do Burgo, Campus Norte, 15782 Santiago de Compostela, Spain
| | - Robert S. Reardon
- College of Business, Florida Atlantic University, 777 Glades Road, Boca Raton, FL 33431 USA
| | - Ahmed Sewaid
- Insper Institute of Education and Research, Rua Quatá, 300-Vila Olímpia, São Paulo, SP 04546-042 Brazil
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33
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The Impact of COVID-19 and Its Policy Responses on Local Economy and Health Conditions. JOURNAL OF RISK AND FINANCIAL MANAGEMENT 2021. [DOI: 10.3390/jrfm14060233] [Citation(s) in RCA: 6] [Impact Index Per Article: 2.0] [Reference Citation Analysis] [Abstract] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 11/17/2022]
Abstract
US states have implemented lockdown measures to contain the COVID-19 pandemic. We assess the impact of state policy responses on local economic and health conditions, with the goal to shed light on marginal health benefits and economic costs associated with social distancing. We find that lockdown measures are effective in alleviating disease severity, but yield significant contraction of the economy. Deteriorating health conditions are disruptive to the labor supply, financial health, and economic output. The adverse economic impact of lockdowns exceeds the economic damage brought by the disease itself, but health conditions better forecast economic contraction outcomes.
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34
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Levine R, Lin C, Tai M, Xie W. How Did Depositors Respond to COVID-19? THE REVIEW OF FINANCIAL STUDIES 2021; 34:hhab062. [PMCID: PMC8241436 DOI: 10.1093/rfs/hhab062] [Citation(s) in RCA: 2] [Impact Index Per Article: 0.7] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 05/19/2021] [Indexed: 05/20/2023]
Abstract
Why did banks experience massive deposit inflows during the pandemic? We discover
that deposit interest rates at bank branches in counties with higher COVID-19
infection rates fell by more than rates at branches—even branches of the same
bank—in counties with lower infection rates. Credit drawdowns, national
policies, such as the Payment Protection Program, and a flight-to-safety do not
account for these cross-branch changes in deposit rates. Evidence suggests that
higher local COVID-19 infection rates are associated with households’ greater
anxiety about future job and income losses, anxiety that induces households to
reduce spending and increase deposits.
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Affiliation(s)
- Ross Levine
- Haas School of Business, University of
California, Berkeley
- Send correspondence to Ross Levine,
| | | | | | - Wensi Xie
- CUHK Business School, Chinese University of Hong
Kong
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35
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Determinants of Differentiation of Cost of Risk (CoR) among Polish Banks during COVID-19 Pandemic. JOURNAL OF RISK AND FINANCIAL MANAGEMENT 2021. [DOI: 10.3390/jrfm14030110] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.3] [Reference Citation Analysis] [Abstract] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 11/16/2022]
Abstract
The aim of the paper is to assess the evolution of the cost of credit risk (CoR) of Polish banks as a result of the COVID-19 pandemic in the first three quarters of 2020 as well as its microeconomic determinants. We analysed the structural diversity of the sample of the 13 largest Polish commercial banks in terms of the evolution of their CoR. For this purpose, a diagraphic method of Jan Czekanowski was used. It allowed us to distinguish two groups of banks displaying features characteristic of multi-object structures and three groups consisting of individual banks characterized by atypical CoR developments, significantly different from the structures of objects classified to the first and second groups. In the second part of the research, in order to identify the determinants of the observed trends, a multiple regression model was used in which the explanatory variable was the dynamics of CoR in the first three quarters of 2020. The parameters of return on capital (ROE) at the end of 2019, Non-Performing Loans (NPLs) at the end of 2019 and the dynamics of write-offs in the period 2017–2019 proved to be important explanatory variables.
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36
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Fahlenbrach R, Rageth K, Stulz RM. How Valuable Is Financial Flexibility when Revenue Stops? Evidence from the COVID-19 Crisis. THE REVIEW OF FINANCIAL STUDIES 2020:hhaa134. [PMCID: PMC7798547 DOI: 10.1093/rfs/hhaa134] [Citation(s) in RCA: 41] [Impact Index Per Article: 10.3] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/06/2023]
Abstract
Firms with greater financial flexibility should be better able to fund a revenue shortfall resulting from the COVID-19 shock and benefit less from policy responses. We find that firms with high financial flexibility within an industry experience a stock price drop that is 26%, or 9.7 percentage points, lower than those with low financial flexibility. This differential return persists as stock prices rebound. Firms more exposed to the COVID-19 shock benefit more from cash holdings. No evidence suggests that recent payouts worsened the average firm’s drop in stock price. Our results cannot be explained by a leverage effect.
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Affiliation(s)
- Rüdiger Fahlenbrach
- Ecole Polytechnique Fédérale de Lausanne (EPFL), Swiss Finance Institute, and ECGI
| | | | - René M Stulz
- Fisher College of Business, The Ohio State University, NBER, and ECGI
- Send correspondence to René M. Stulz,
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37
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Abstract
We show that a large number of firms adopt poison pills during periods of market turmoil. Specifically, during the coronavirus pandemic, many firms adopted poison pills following declines in valuations, and stock prices increased upon the announcement of firms’ poison pill adoption. Stock price increases are driven by (1) firms in which activist shareholders acquire ownership stakes and (2) firms in industries that had high exposure to the crisis. Likewise, we find a positive reaction to pills with provisions directed at stalling activists’ interventions. Our results suggest that crisis pills that target potentially disruptive ownership changes may benefit current shareholders.
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Spatt CS. A Tale of Two Crises: The 2008 Mortgage Meltdown and the 2020 COVID-19 Crisis. THE REVIEW OF ASSET PRICING STUDIES 2020. [PMCID: PMC7665755 DOI: 10.1093/rapstu/raaa019] [Citation(s) in RCA: 21] [Impact Index Per Article: 5.3] [Reference Citation Analysis] [Abstract] [Track Full Text] [Download PDF] [Subscribe] [Scholar Register] [Indexed: 11/26/2022]
Abstract
The causes and consequences of the 2008 mortgage meltdown and 2020 COVID-19 crisis are quite different: the 2008 mortgage meltdown reflected infection of the financial system due to excess leverage and poor-quality mortgage loans, and the recent crisis reflects a substantial global economic shock to contain the viral outbreak of the coronavirus. Yet the financial and medical systems share many elements, such as opacity and interconnectedness as well as adequate buffers and reserves. We examine these themes as well as asset pricing, moral hazard (though it was at the root of the crisis only in the Great Recession), the consequences for government as a systemic actor, economic concentration, and capital market regulation in the two crises. In both crises, interventions in financial markets and disruptions in the housing market played important, but differing, roles. The recent crisis elucidates open questions about the foundation of financial economics and risk sharing. (JEL G1, G2, G3, E4, E5, B2) Received: June 6, 2020; editorial decision: August 25, 2020; Editor: Jeffrey Pontiff.
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Acharya VV, Steffen S. The Risk of Being a Fallen Angel and the Corporate Dash for Cash in the Midst of COVID. THE REVIEW OF CORPORATE FINANCE STUDIES 2020. [PMCID: PMC7454892 DOI: 10.1093/rcfs/cfaa013] [Citation(s) in RCA: 97] [Impact Index Per Article: 24.3] [Reference Citation Analysis] [Abstract] [Track Full Text] [Download PDF] [Subscribe] [Scholar Register] [Indexed: 11/17/2022]
Abstract
Data on firm-loan-level daily credit line drawdowns in the United States expose a corporate “dash for cash” induced by the COVID-19 pandemic. In the first phase of the crisis, which was characterized by extreme precaution and heightened aggregate risk, all firms drew down bank credit lines and raised cash levels. In the second phase, which followed the adoption of stabilization policies, only the highest-rated firms switched to capital markets to raise cash. Consistent with the risk of becoming a fallen angel, the lowest-quality BBB-rated firms behaved more similarly to non-investment grade firms. The observed corporate behavior reveals the significant impact of credit risk on corporate cash holdings.
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Affiliation(s)
- Viral V Acharya
- Stern School of Business, New York University, CEPR, ECGI, and NBER
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