Impact of Covid-19 on corporate solvency and possible policy responses in the EU.

The massive contagion of new coronavirus (Covid-19) has disrupted many businesses across the European Union. This has resulted in an immense drag on the revenues and cash flows that may lead to a significant increase in corporate bankruptcies. In this paper, we investigate the impact of Covid-19 on the solvency profile of the firms in the EU member states. We introduce multiple stress scenarios on the non-financial listed firms and report a progressive increase in the probability of default, an increase of debt payback, and declining coverages. Our results indicate that the solvency profile of all firms deteriorates. The manufacturing, mining, and retail sector are most vulnerable to a decline in market capitalization and a reduction in sales revenues. The paper also examines the possible policy interventions to sustain solvency at a pre Covid-19 level. Our findings suggest that for a moderate deterioration in economic conditions, a tax deferral is sufficient. However, in the event of exacerbating business shocks, there should be hybrid support through debt and equity to avoid a meltdown. This study has important implications for policymakers, corporate managers, and creditors.

Carbon neutrality target for leading exporting countries: On the role of economic complexity index and renewable energy electricity.

In order to contribute to the existing limited energy-environment literature, the present study analyze the carbon neutrality targets of the 16 major exporting economies while considering the role of economic complexity and renewable energy electricity consumption empirically by investigating the most recent dataset covering the period from 1990 to 2019 by employing advanced econometric techniques. This study uses the economic complexity index, connecting the country's productive structure with the amount of knowledge that the products represent. Employing various cointegration and regression techniques such as augmented mean group (AMG) and dynamic ordinary least square (DOLS) confirms the long-run cointegration among the variables such as economic growth, economic complexity, renewable energy consumption, and CO2 emission. Also, this study provides evidence that confirms the validity of the environmental Kuznets curve hypothesis in the leading exporting economies. Regarding the carbon neutrality target, we found that both economic complexity and renewable electricity, if increase by one percent each, significantly reduce CO2 emissions by 0.1491 (AMG) and 0.130% (DOLS) and 0.160 (AMG) and 0.203% (DOLS), respectively, that help attain the carbon neutrality target.

Price reaction, volatility timing and funds' performance during Covid-19.

In this paper we assess the price reaction, performance and volatility timing of European investment funds during the outbreak of Covid-19. We analyze the time period between January and June 2020 and demonstrate that while most of the investment funds exhibit stressed performance, social entrepreneurship funds endured resilience. This performance remained robust during the various stages of evolution of this contagion. The social funds also demonstrated volatility timing that was absent for most of their counterparts. We attribute the overall stability of these funds to their niche investments in social enterprises that specialize in providing innovative solutions for social issues.