The impact mechanism and breakthrough path of COVID-19 on enterprise financial distress: Evidence from China

Abstract

COVID-19 has seriously impacted China's real economy and directly threatened the survival and healthy development of enterprises. Based on the data of Chinese A-share listed enterprises in Shanghai and Shenzhen from 2017 to 2021, this paper empirically examines the impact and mechanism of COVID-19 on enterprises financial distress. The findings are as follows: (1) The impact of COVID-19 significantly increases the risk of enterprises financial distress. (2) There are differences in the effect of COVID-19 on the financial situation of enterprises with different characteristics, with significant negative impacts on enterprises in industries such as mining and manufacturing, as well as smaller enterprises and those located in the central and western regions. (3) Digital transformation and government subsidies can alleviate the negative effects of COVID-19 on enterprises financial distress. The paper provides a basis for enterprises to recover from financial difficulties as soon as possible, enhance competitiveness, and realize sustainable development.