Abstract
This study aims to evaluate the changes in the credit risk of the health care industry in China due to the COVID-19 epidemic by the modified KMV (named by Kealhofer, Mcquown, and Vasicek) model to calculate the default distances. We observe that the overall default distance mainly first decreased and then increased before and after the COVID-19 epidemic control in China; after the epidemic was controlled, the overall credit risk was reduced by 22.8%. Specifically, as shown in subdivided industries, health care equipment and health care facilities have larger credit risk fluctuations, while health care suppliers, health care distributors, and health care services have smaller fluctuations. These results can contribute to our understanding of why the COVID-19 epidemic in China could be controlled earlier, and software facilities are more important than hardware facilities in public health safety. Our methodological innovation is to use the GARCH (generalized autoregressive conditional heteroskedasticity) model and threshold regression model to modify the important parameters of the KMV model. This method has good accuracy in the Chinese environment.
Highlights
The subject of the impact of COVID-19 [1,2,3,4] consists of a set of problems that are central to returning to the pre-COVID-19 era
The plan of this paper is as follows: First, we evaluate the impact of COVID-19 on the overall credit risk of listed companies in the health care industry in China
The impact of COVID-19 on the credit risk of the health care industry has obvious industry characteristics. This phenomenon can be explained by the difference in the credit risk impact of different subdivided industries
Summary
The subject of the impact of COVID-19 [1,2,3,4] consists of a set of problems that are central to returning to the pre-COVID-19 era. Research on the reduction of credit risk in the health care industry under the market environment is helpful to judge from the stage of epidemic prevention and control to the stage of economic recovery in China. There is a certain sequential relationship between the two stages, but the transition period may be very long or very short The success of this transition has always lacked certain criteria for judging. Because healthy behaviors decisions involve some choices with important health consequences such as diet, exercise, weight loss, which are widespread and closely connected with the market. They are an important barometer of market recovery.
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