Modern pandemic crises and default risk: Worldwide evidence

This article examines the relationship between modern health pandemic crises and financial stability. Specifically, it collects data on 250,223 firms in 43 countries (or regions) during five modern pandemic crises, SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014), and Zika (2016), and finds that pandemic crises significantly increase the default risk of enterprises. Further analysis shows that formal and informal institutions acted as a "cushion” against the pandemic crisis. The earlier a country adopts IFRS, the more unimpeded access to information, and the more stable religious and ethnic relations within the country can reduce the negative impact of a pandemic on financial stability. This article addresses the hitherto inadequacy of COVID-related data. In addition, this article argues that governments should build sound state institutions to withstand macroeconomic shocks and highlights the heterogeneity of default risk for enterprises operating in countries with different institutions. © 2023 John Wiley & Sons Ltd.

Influence of institutional differences on trade credit use during pandemics

This study examines the formal and informal institutions that affected trade credit during the pandemic periods. To this end, we analyze 590,025 firm-year observations across 107 countries during six recent pandemic crises: SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014), Zika (2016), and COVID-19 (2020). The study finds that formal legal institutions and firms' information transparency during pandemic periods act as a "brake” for trade credit usage. By contrast, informal institutions with religious connotations or attributes, social trust, and policy stability play a "cushion” role in softening the impact of pandemic crises when a firm applies for trade credit. These results remain robust after alternating the estimation techniques, trade credits, pandemic variables, and different samples. This study offers new evidence on the role of trade credit from the perspectives of formal and informal institutions during pandemic crises. The outcomes thus provide information worthy of consideration by policymakers when faced with informal institutional conditions and support government efforts to improve unstable formal systems and prevent severe shocks in the future. © 2022