COVID-19 Shock Research Articles

Stock Market Persistence in MENA and OIC Countries

ABSTRACT This research paper analyzes how the pandemic caused by the coronavirus has affected eight MENA and three OIC stock market indices using advanced methodologies based on fractional integration. With this methodology we try to measure the persistence of the financial data in order to understand the long-term market dynamics of these two regions and to identify whether the COVID-19 shock has caused structural changes in the time series. Moreover, we want to identify if the shocks in the series have had permanent or transitory effects. The time period examined starts from pre-pandemic times at 2003, and first goes to the end of 2019; then, we also consider the COVID-19 pandemic (with data ending at December 2021) and then extend the analysis onwards to include the war between Russia and Ukraine (data ending at February 2023). The results indicate that there have not been significant long-lasting impacts from the COVID-19 pandemic or the Russia-Ukraine war on the degree of persistence in the series when using monthly data; however, as far as daily and weekly data are concerned the shocks have had some effect on the degree of persistence with daily data in the cases of Egypt, Indonesia, Malaysia, Turkey, and with weekly data for Bahrain, Egypt, Kuwait, Malaysia, Morocco and Turkey.

Do bank ties influence stock repurchases in a bank-based financial system during financial distress? A pre-registered report

This pre-registered study seeks to investigate the effects of bank ties on corporate repurchase decisions and stock price reactions to buyback announcements. We make causal inferences to provide more insights into bank ties for stock repurchase decisions during extreme financial distress. We focus on the COVID-19 pandemic as an exogenous shock and identify whether the COVID-19 shock affected the bank-ties effect of the motives of stock repurchase decisions in a bank-based financial system. Our study sheds light on the motives behind stock repurchase decisions and the role of banks in corporate cash distribution to shareholders. Furthermore, our study contributes to understanding how extreme financial distress, such as COVID-19, affects the motive for stock repurchase in a bank-based financial system.

EXPLORING COVID-19 AND SOCIAL CONFLICT IN AFRICA: NIGERIA AS A CASE STUDY


 There are many dimensions to conflict in Africa. It depends on the nature of the underlying demography, heterogeneity, and historical context of the state’s social and political problems. The impact of the coronavirus has greatly affected the socioeconomic structure and governance system in Africa, leading to social conflicts. Moreover, the social conflict led to deaths, job losses, and human capital reductions, resulting in economic catastrophes in South Africa, Egypt, and Ethiopia, among others. In Nigeria, the government was unable to cushion the impact of Covid-19, frustrated by the issues of poverty and inequality, wherein the masses were pounded with hunger and insecurity; a corrupt policing system precipitated the social unrest in 2020. Nigeria’s social issues, coupled with the shock of Covid-19, cumulated into protest actions, looting, and police brutality. The government’s inadequate response to the political crisis and state of unrest greatly influenced the public’s belief and outlook on social concerns. The research postulates the following question: how did the social conflict in Africa and Nigeria become overheated during Covid-19? The paper adopts a qualitative method that explores existing literature and media sources on social conflicts and Covid-19 in Africa and Nigeria. The study anchors its theoretical framework on the fragile state theory. The paper concludes that Nigeria’s weakened socioeconomic structure met with the shock of the horror of Covid-19, which sparked social conflict in the country.

Stock market reactions under the shadow of the COVID-19 pandemic: Evidence from China

This paper studies how the Chinese stock market reacts to new COVID-19 infections under the zero-COVID policy. Consistent with the literature, we find that a COVID-19 outbreak within a city adversely affects the performance of local firms, but further unveils the effect’s nonlinearity. More importantly, we document an unexpected pattern of spatial spillover of the COVID-19 shock, which is likely to be caused by the policy itself. In addition, firms with significant retail exposure are most vulnerable, while firms with low pandemic exposure, larger size, state-owned enterprise (SOE) status, and robust finances demonstrate greater resilience to the COVID-19 shock. Mechanism analysis indicates that the COVID-19 effects are realized through both cash flow and discount rate channels. Supplementary back-of-the-envelope calculations illustrate the substantial economic consequences of these phenomena, which shed light on the debate on the optimal policy in response to a future pandemic.

The Covid Shock, The Rise of Defi, and Bitcoin's Increasing Market Risk

This paper aims to determine whether Bitcoin’s market risk increased in response to the COVID-19 shock. Our analysis employs familiar asset pricing models used by investment managers. Our main result is that Bitcoin’s market risk increased after the lockdown in March 2020. Wavelet analysis that captures both time and scale changes is introduced, and risk estimates that allow for both time and scale changes are provided, consistent with our main finding. From the standpoint of traditional investments, we find that the market risk of a Bitcoin investment after March 2020 is similar to that of a risky tech stock.

Resilience of Japanese Multinational Enterprise Production Networks during the COVID-19 Pandemic

Abstract We use COVID-19 as an exogenous shock to analyze the impact of the COVID-19 pandemic on Japanese multinational affiliates’ performance, determining that the pandemic adversely impacted performance in general, but severe disruptions did not last longer than one year. The COVID-19 shock also affected global transaction networks, and affiliates’ total sales were severely affected by procurement challenges. Regarding heterogeneous effects, affiliates actively engaged in trade experienced worse conditions than local-oriented firms. Finally, we explore whether and which local backward linkages could mitigate such shocks, concluding that affiliates’ local procurement from companies beyond only Japanese firms could gain resilience.

The impact of the heterogenous fiscal policy stance of euro-area member states on ECB monetary policy

This article assesses the influence of the fiscal stance of different euro-area members on the monetary policy actions of the European Central Bank. This issue has increased in relevance due to the widening disparities in the levels of debt across euro-area member states. We utilise a thick modelling approach that includes various GMM model specifications for the five largest euro area economies using quarterly projections data from 2002 to 2022. The findings indicate that the fiscal deficits of different euro area countries did not consistently exert a substantial impact on monetary policymaking. This conclusion holds even after the COVID-19 shock, with projected inflation remaining the most consistently significant indicator.

How the COVID-19 shock influenced companies listed on the WSE and how they managed their liquidity

Abstract The aim of the article is to analyze the liquidity of non-financial companies listed on the Warsaw Stock Exchange. The article addresses the liquidity of the examined group against the background of the entire market and its relationship with debt, profitability, growth and the risk of bankruptcy, including in the context of the COVID-19 pandemic. The article examines the assertion that COVID-19 influenced the practice of aggressive liquidity management in terms of indebtedness, profitability, value creation, and risk of bankruptcy. The research revealed that public companies behaved differently than the entire sector by pursuing an aggressive management policy and that the pandemic caused an even greater decrease in the static liquidity ratios while cash conversion cycle (CCC) increased. In addition, the decline in EPS growth and the increase in Z-Score during the pandemic could mean that enterprises focused on reducing the risk of bankruptcy rather than maximizing value during the pandemic shock. Before the pandemic, CCC influenced DER, and during the pandemic, static indicators began to play a more important role in the financial strategies of the surveyed companies. The research results add to liquidity theory and its impact on shaping financial strategy, especially during a financial crisis. In addition, an analysis of the impact of liquidity on earnings per share (EPS) growth and Z-Score was conducted. They represent the creation of value and the assessment of the risk of bankruptcy, making this paper particularly insightful. The results obtained provide valuable guidance to decision-makers managing liquidity and debt in corporate finance.

COVID-19 shock, fiscal subsidies, and consumption resilience of new energy vehicles: evidence from Shanghai, China

New energy vehicles are regarded as an important measure for improving air quality, reducing oil dependence, fostering emerging industries, and promoting high-quality development. Since 2009, the Chinese government has been committed to promoting new energy vehicles through various policy measures, such as fiscal subsidies. Meanwhile, the outbreak of the COVID-19 pandemic at the end of 2019 has brought great impact on the economy and society. Thus, it is a topic of research to determine if the fiscal subsidy policy can assist new energy vehicles to resist the pandemic’s impact and build consumption resilience. Current researches lack enough attention to the role of fiscal subsidy policy in enhancing consumption resilience under the pandemic impact. By utilizing monthly sales data of new energy vehicles in Shanghai from January 2018 to February 2021, this study employs regression discontinuity (RD) analysis and the combination of the RD with the differences-in-differences (DID) model, to comprehensively evaluate the impact of the COVID-19 pandemic on new energy vehicle consumption and the effectiveness of fiscal subsidy policies in enhancing consumption resilience. The findings reveal that the COVID-19 pandemic shock, with a bandwidth of 3 months, led to a 23% decrease in new energy vehicles sales. In comparison with unsubsidized vehicles, sales of subsidized new energy vehicles significantly increased by 15–80% during the pandemic shock, indicating that fiscal subsidies are crucial in enhancing the consumption resilience of new energy vehicles. Compared with other country-specific new energy vehicles, the subsidy effect of domestic new energy vehicles is relatively inadequate during the pandemic shock. The retreat from subsidy policies has contributed to a decline in the consumption of new energy vehicles in response to the pandemic shock. It is necessary to further improve the consumption resilience of domestic new energy vehicles and pure electric vehicles.

Asymmetric dynamic spillover and time-frequency connectedness in the oil-stock nexus under COVID-19 shock: Evidence from African oil importers and exporters

Amid the profound disruptions triggered by COVID-19 in financial markets, this paper investigates changes in the interconnectedness behavior in terms of mean and volatility contagion between crude oil and stock markets in African oil importers and exporters. To this aim, we employ asymmetric BEKK-Copula-GARCH and Wavelet Coherence methods, and the analyses are evaluated before and during COVID-19. The findings indicate that the interdependence between crude oil and African stock returns is relatively weak before COVID-19, but the strength is amplified during the pandemic. Significant volatility spillover from crude oil to stock markets is exhibited in South Africa, Tunisia, and Tanzania during COVID-19. However, the results are insignificant in all the selected African countries before the pandemic. Furthermore, evidence of asymmetric volatility transmission is uncovered in South Africa and Tunisia during COVID-19. The findings also reveal that the connectedness between crude oil and African stocks is time and frequency dependent, with the strong linkage observed in the mid-term and long-term at specific time points. Overall, this study holds vital contributions as it unveils new insights into how COVID-19 reshaped the traditional behavior regarding the oil-stock nexus in Africa, thus informing policy responses and investment strategies at times of extreme events.

Economic recovery of the new poor created by COVID-19: evidence from Bangladesh

ABSTRACT The COVID-19 shock resulted in a large number of people becoming newly poor in Bangladesh, for whom recovery was slow and difficult. In response, BRAC implemented a nationwide program – credit, business planning support, and mentoring – targeting the economic recovery of the new poor. This paper estimates its impact using a mixed method and finds that the program had a significant positive effect on employment, income, and assets, indicating a faster economic recovery of program participants. The learnings from this program can have major policy implications for future disaster responses targeting livelihood recovery, specifically during the time-sensitive transitory phase from relief to long-term development.

Bank Crisis Management Strategies for Leveraging Effective Performance of the Barbados’ Banking Institutions in Times of Crisis

Given a series of turbulences and disruptions that most of the financial institutions in the Caribbean faced in recent years as a result of the 2008 financial crisis, Hurricane Dora, Covid-19 and now the Russia-Ukraine War that induced energy shortages and inflation, this study uses integrative review to evaluate bank crisis management strategies that can be adopted for leveraging effective performance of the Barbados’ banking institutions in times of crisis. To accomplish that, the integrative review of different studies was structured according to five steps encompassing the designation of integrative review objectives and questions, literature search, inclusion/exclusion criteria, quality assessment and data synthesis. In crisis times like during Covid-19, outcomes of integrative review indicated the Covid-19’s devastating effects on the performance of most of the banking institutions in Barbados to have been reflected in the declining deposits/savings, new clients' borrowings and loan repayments. Covid-19 also instigated an increment of non-performing loans and the bank’s market disconnectedness, whilst also undermining the implementation of growth-improvement plans and strategies. As profitability and liquidity crises set in, findings revealed Covid-19 to have disrupted the bank’s seamless operations, as declining bank personnel’s morale, motivation and commitment also affected their performance. To improve the banks' future resilience, most of the reviewed theories and literature proposed the best bank crisis management strategies like the adoption of contingency planning to improve the bank’s future resilience. Besides dedication of reserve resources for managing and mitigating the disruptive effects of unpredicted events, others suggested the essence for the encouragement of a culture of change, flexibility and agility. However, some of the reviewed studies argued that no best bank crisis management practices and strategies emerged from Covid-19 crisis management that can be replicated for managing such similar complex crises in the future. This implies as the banks were significantly overwhelmed by the Covid-19 shocks, it was not practically possible for them to think and rethink to emerge with the immediate best bank crisis management strategies that can be emulated going into the future. Since this suggests most of the banking institutions in Barbados must still explore the best crisis management strategies that can be adopted to improve the banks’ future resilience to withstand all shocks, the study concludes with the suggestion of the Systematic Bank Crisis Management Framework that the banks can adopt going into the future.

Food and Nutrition Insecurity and Farming Household Resilience to COVID-19 Shocks in Ghana

The COVID-19 pandemic affected farming households in Sub-Saharan Africa. As a case in point, we examine farming households’ resilience to food and nutrition insecurity in Ghana under the COVID-19 shocks. Focus group discussions were initially conducted with farming household heads to identify households’ sources of resilience and the different COVID-19 shocks. A multi-stage random sampling technique was then used to survey 252 farming households. We used different econometric modelling techniques, that is, the multiple indicators multiple causes modelling procedure, ordinary least square, and multinomial probit model, for data analysis. Our results provide supportive evidence affirming that COVID-19 shocks undermine farming households’ resilience and food and nutrition security. Urban and male-headed households experience more food and nutrition insecurity than rural and female-headed households. Farming households’ adaptive capacity significantly contributed to household resilience and food and nutrition security. The findings suggest that lessons learned from the current pandemic can help policymakers, governments, and international organisations build adequate responses and interventions that strengthen and support farming households’ resilience to food and nutrition security and systemic shocks such as COVID-19 in Ghana.

Economic incentives for tourists: Evaluating a regional policy measure

This Note examines the effectiveness of a regional policy centered around offering discounted vouchers to tourists. It specifically studies the case of Sicily, which, unlike other Italian regions, implemented this policy between 2021 and 2023 in response to the aftermath of the COVID-19 shock. Difference-in-differences estimates reveal that this intervention has failed to significantly affect tourism.

A Valuation Model for the Development of Sinovac Biological Company under COVID-19 Shock

This paper provides an in-depth study of the impact of the COVID-19 pandemic on the global economy and the pharmaceutical and medicine industry, focusing on the Chinese company Biologicals. The financial situation of Sinovac Biologicals before and after the pandemic is analyzed in depth by building a valuation model with data from two different time periods. Before the COVID-19, the company faced cash flow problems and a relatively low market capitalization. This is mainly because at that time, the company may not have been involved in areas related to vaccine production, and the market capitalization was constrained by market demand and industry competition. However, with the outbreak, the company became actively involved in the development and production of the COVID-19 vaccine, leading to a significant improvement in its free cash flow and a rise in its market capitalization. Although the model results emphasize this positive trend, this papermust keep in mind the model's uncertainty and risk factors. Future economic and market conditions are fraught with uncertainty, and Cochrane Biologics may also be exposed to other risks, such as volatility in the vaccine market, policy changes and increased competition. Therefore, a combination of these factors is critical to accurately assessing the company's valuation and prospects.

Covid-19 severity, government responses and stock market reactions: a study of 14 highly affected countries

PurposeThis study undertakes a comprehensive investigation into the far-reaching repercussions of Covid-19 stimulus packages and containment policies on stock returns, meticulously examining a diverse array of 14 distinct markets.Design/methodology/approachThis study employed the Panel SVAR model to analyze the relationships between various policies and stock market performance during the Covid-19 outbreak. The sample comprises 5432 daily observations spanning from December 2020 to January 2022 for the 14 selected markets, with missing data excluded.FindingsThe findings reveal three consistent impacts across all 14 markets. Firstly, stock returns immediately reversed and decreased within a day when Governments tightened containment policies. Secondly, economic stimulus packages led to a fall in stock returns. Thirdly, an increasing death rate caused the stock return to decrease in the following two days. These findings are supported by the uniform impulse responses in all three shocks, including common, composite and idiosyncratic shocks. Furthermore, all inverse root tests satisfy the stability conditions, indicating the stability and reliability of Panel SVAR estimations.Practical implicationsOne vital implication is that all government decisions and measures taken against the shock of Covid-19 must consider economic impacts to avoid unnecessary financial losses and support the effective functioning of stock markets during similar shocks. Secondly, investors should view the decline in stock returns due to Covid-19 effects as temporary, resulting from anxiety about the outbreak. The study highlights the importance of monitoring the impact of policies on financial markets and the broader economy during crises. Overall, these insights can prove helpful for investment decisions and policymaking during future crises.Originality/valueThis study constitutes a noteworthy addition to the literature on behavioural finance and the efficient market hypothesis, offering a meticulous analysis of the multifaceted repercussions of Covid-19 on market interactions. In particular, it unveils the magnitude, duration and intricate patterns of market volatilities linked to significant shock events, encompassing a comprehensive dataset spanning 14 distinct markets.

Trade shocks and trade diversion due to epidemic diseases: Evidence from 110 countries.

COVID-19 has been a massive trade shock that has disrupted global trade, making the last few years a special phase. Even during normal times, epidemic diseases have acted as trade shocks in specific countries, albeit not to the same extent as COVID-19. For some trade shocks, the situation normalizes after the disease transmission is over; for some, it does not. Thus, specific countries can sometimes lose their original trade ratio due to trade diversion; that is, an epidemic disease could lead to unexpected industry restructuring. To examine this, based on data on 110 WHO members from 1996 to 2018, we use a fixed-effect panel model supported by the Hausman Test to empirically identify whether epidemic diseases can cause trade shocks and trade diversion. We find: First, epidemic disease can lead to negative shocks to a country's trade growth and its ratio of worldwide trade. Second, with a longer epidemic, the probability of the trade diversion effect increases. Our results hold even after considering country heterogeneity. This presents a considerable concern about the shock of COVID-19 lasting further. Many countries are not just facing the problem of temporary trade shocks, but also the challenge of trade diversions. In particular, the probability of trade diversions is increasing rapidly, especially for late-developed countries due to their lack of epidemic containment and vaccine-producing capabilities. Even middle and high income countries cannot ignore global industry chain restructuring. Forward-looking policies should be implemented in advance; it may be too late when long-term trade damage is shown.

QUANTIFYING THE COVID-19 SHOCK IN CRYPTOCURRENCIES

This paper sheds light on the changes suffered in cryptocurrencies due to the COVID-19 shock through a nonlinear cross-correlations and similarity perspective. We have collected daily price and volume data for the seven largest cryptocurrencies considering trade volume and market capitalization. For both attributes (price and volume), we calculate their volatility and compute the Multifractal Detrended Cross-Correlations (MF-DCCA) to estimate the complexity parameters that describe the degree of multifractality of the underlying process. We detect (before and during COVID-19) a standard multifractal behavior for these volatility time series pairs and an overall persistent long-term correlation. However, multifractality for price volatility time series pairs displays more persistent behavior than the volume volatility time series pairs. From a financial perspective, it reveals that the volatility time series pairs for the price are marked by an increase in the nonlinear cross-correlations excluding the pair Bitcoin versus Dogecoin [Formula: see text]. At the same time, all volatility time series pairs considering the volume attribute are marked by a decrease in the nonlinear cross-correlations. The K-means technique indicates that these volatility time series for the price attribute were resilient to the shock of COVID-19. While for these volatility time series for the volume attribute, we find that the COVID-19 shock drove changes in cryptocurrency groups.

Robotization as a Factor of Russian Firms’ Adaptation to Non-Economic Shocks

Robotization and automation of various industries is one of the main technological trends of the past decade. However, the contribution of robotization to firms' success in the COVID-19 crisis has been far from fully explored to date. In addition, there is a lack of empirical studies on the impact of robotics on companies’ operation under the shock of the sanctions of 2022. The article is devoted to the analysis of factors and effects of robotization of Russian manufacturing companies in the context of recent shocks. Three hypotheses are put forward to be empirically tested: (1) in the pandemic and post-pandemic period, robotization was more characteristic of large businesses than of small and medium-sized firms; (2) firms that used robots overcame the crisis more successfully; (3) robotized firms performed better under the 2022 sanctions. The research approach consists of the empirical analysis (through regression modeling) of data from a survey of 1,900 Russian manufacturing companies’ CEOs conducted in the second half of 2022. The authors found a positive relationship between robot adoption after 2019 and the business size. It is shown that in the COVID-19 crisis robotization was an important factor in preserving employment. The authors also found a significant positive relation between the success of companies in passing the COVID-19 and sanctions shocks and their use of imported equipment. The study provides new insights into the factors of Russian firms’ robotization in the pandemic and post-pandemic period, as well as the specifics of their adaptation to shocks in 2020 and 2022. From a practical point of view, the most important results are the evidence obtained on the widening digital divide between SMEs and large firms, as well as on the contribution of the use of imported capital goods to the resiliency of Russian firms.

THE (IN)EFFICIENCY OF USA EDUCATION GROUP STOCKS: BEFORE, DURING AND AFTER COVID-19

This paper represents a pioneering effort to investigate multifractal dynamics that exclusively encompass the return time series of USA Education Group Stocks concerning two non-overlapping periods (before, during, and after COVID-19). Given this, we employ the Multifractal Detrended Fluctuations Analysis (MF-DFA). In this sense, we investigate the generalized Hurst exponent [Formula: see text] and the Rényi exponent [Formula: see text] for each asset and quantify their statistical properties, which allowed us to observe separately the contributing small scale (primarily via the negative moments [Formula: see text]) and the large scale (via the positive moments [Formula: see text]). We perform a fourth-degree polynomial regression fit to estimate the complexity parameters that describe the degree of multifractality of the underlying process. Also, we shall apply the inefficiency multifractal index to assess the COVID-19 shock for both periods. Our findings show that for both periods, the majority of these assets are marked by multifractal dynamics associated with persistent behavior [Formula: see text], a higher degree of multifractality and the dominance of large fluctuations. At the same time, most of these assets show asymmetry parameter [Formula: see text] for both periods, indicating that large fluctuations contributed more to multifractality in the time series of returns.