Bank systemic risk around COVID-19: A cross-country analysis

Duan, Yuejiao; Ghoul, Sadok El; Guedhami, Omrane; Li, Haoran; Li, Xinming

doi:10.1016/j.jbankfin.2021.106299

Cited by 153 publications

(72 citation statements)

References 71 publications

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“…Our paper contributes to a new and growing literature on the coronavirus and its impact on firms using stock market data (Ashraf, 2020 ; Bae, El Ghoul, Gong, & Guedhami, 2021 ; Baker, Bloom, Davis, & Terry, 2020 ; Ding et al, 2021 ; Duan, El Ghoul, Guedhami, Li, & Li, 2021 ; Fahlenbrach, Rageth, & Stulz, 2021 ; Harjoto, Rossi, Lee, & Sergi, 2021 ; Narayan, Phan, & Liu, 2021 ; Ramelli & Wagner, 2020 ; Shen, Fu, Pan, Yu, & Chen, 2020 ). We extend these studies by providing evidence on the differential effects of the pandemic on the stock returns of MNCs and DCs.…”

Section: Introductionmentioning

confidence: 89%

The dark side of globalization: Evidence from the impact of COVID-19 on multinational companies

et al. 2022

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The COVID-19 pandemic has led to economic and health crises (“twin crises”) worldwide. Using a sample of firms from 73 countries over the period January to December 2020, we examine stock price reactions of multinational corporations (MNCs) and purely domestic companies (DCs) to the crisis. We find that, on average, MNCs suffer a significantly larger decline in firm value relative to DCs during the stock market crisis caused by the pandemic with notable heterogeneity in this underperformance across both industry and region. The evidence of MNC underperformance is robust to using abnormal returns, an alternative crisis window, a matched sample that accounts for differences in characteristics between MNCs and DCs, alternative model specifications, and alternative proxies for multinationality. Further analysis on the effect of government responses on the valuation gap suggests that stringent government responses exacerbate MNCs’ underperformance. Finally, we show that a stronger financial system mitigates negative crisis returns, especially under stringent government responses, while real factors, such as the firm’s supply chain, investments in human capital, research and development, exacerbate negative crisis returns. Our findings have important implications for managers of MNCs and government policymakers alike and contribute to studies on the international diversification–performance relation by demonstrating a dark side of globalization during a tail-risk event.

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Section: Introductionmentioning

confidence: 89%

The dark side of globalization: Evidence from the impact of COVID-19 on multinational companies

et al. 2022

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“…During the COVID-19 pandemic, the systemic risk values of all countries were relatively stable before March, and thereafter rose sharply and peaked in mid-to-late March. Duan et al [12] considered that the COVID-19 will increase the vulnerability of the banking system and cause systemic risks. Therefore, using more than a thousand listed banks in 64 countries as a sample to calculate its

, the study found that the occurrence of the COVID-19 has systemic risks.…”

Section: Literature Reviewmentioning

confidence: 99%

The correlations among COVID-19, the effect of public opinion, and the systemic risks of China’s financial industries

Ouyang

Chen

Lai

et al. 2022

Physica A: Statistical Mechanics and its Applications

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“…Moreover, Acharya, Engle, and Steffen (2021) and Dunbar (2021) show a significant underperformance of bank stock returns relative to other firms, which they attribute to high degrees of the balance-sheet liquidity risk. Accordingly, Duan, Ghoul, Guedhami, Li, and Li (2021) show that the COVID-19 pandemic increases the systemic risk in the banking sector, where the adverse effects are more pronounced for large and highly leveraged banks. In addition, some studies show that bank lending is significantly lower in the countries that are more affected by the pandemic, while the response of the public health sector to the crisis has a positive effect on bank lending (Çolak and Özde Öztekin, 2021).…”

Section: Introductionmentioning

confidence: 99%

Pandemic waves, government response, and bank stock returns: evidence from 36 countries

Bales

Burghof

2022

FREP

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PurposeThe paper examines the impact of COVID-19 on bank stock returns over various time scales and frequencies for 36 countries. Moreover, the authors look at the governments' responses to the corona crisis and examine its impact on bank stock returns.Design/methodology/approachThe paper applies continuous wavelet transformation to obtain robust estimates of the co-movement (coherency) between confirmed cases and bank stock returns over time and at different time scales. Furthermore, the authors apply fixed effects panel regression to examine the response of bank stocks to domestic COVID-19 policies.FindingsThe results indicate that the number of confirmed COVID-19 cases negatively impacts bank stock returns during different waves of the pandemic in the medium-run. However, there is only little dependence in the very short-run. Moreover, bank stock returns positively react to domestic COVID-19 polices. This demonstrates that governmental interventions not only reduce the spread of COVID-19 but are also able to thereby calm financial markets.Originality/valueThe application of wavelet methods to the field of economics and finance is relatively recent and allows the distinction between short-term and long-term effects. Standard econometric methods, in contrast, only operate within the time domain. This paper combines wavelet methods with conventional econometrics to answer the research question.

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Bank systemic risk around COVID-19: A cross-country analysis

Cited by 153 publications

References 71 publications

The dark side of globalization: Evidence from the impact of COVID-19 on multinational companies

The dark side of globalization: Evidence from the impact of COVID-19 on multinational companies

The correlations among COVID-19, the effect of public opinion, and the systemic risks of China’s financial industries

Pandemic waves, government response, and bank stock returns: evidence from 36 countries

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