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

Impact of coronavirus pandemic on stock index: A polynomial regression with time delay

Motivation

Under contemporary market conditions in China, the stock index has been volatile and highly reflect trends in the coronavirus pandemic, but rare scientific research has been conducted to model the possible nonlinear relations between the two indicators. Added, on the advent that covid-related news in one time period impacts the stock market in another period, time delay can be an equally good predictor of the stock index but rarely investigated.

Objectives

To contribute to filling the gaps identified in existing research, this study models relationship between the stock market index and coronavirus pandemic by leveraging volatility in the stock market and covid data through time delay and best degree in a polynomial environment. The resultant optimal time delay and best degree model is used to derive a high-accuracy prediction of stock market index.

Novelty

In line with the possible relations, the novelty of this study is that it proposes, validates and implements polynomial regression with time delay to model nonlinear relationship between the stock index and covid.

Methods

This study utilizes high-frequency data from January 2020 to the first week of July 2022 to model the nonlinear relationship between the stock index, new covid cases and time delay under polynomial regression environment.

Findings

The empirical results show that time delay and new covid cases, when modelled in a polynomial environment with optimal degree and delay, do present better representation of the nonlinear relationship such predictors have with stock index for China. Relative to results from the polynomial regression without delay, the empirical evidence from the model with delay show that an optimal time delay of 17 weeks makes it possible to predict the stock index at high accuracy and record improvements of 16-fold or higher. The representative delay model is used to project for up to 17 weeks for future trends in the stock index.

Implication

The implication of the findings herein is that the prowess of the time delay polynomial regression is heavily dependent on instability in covid-related time trends and that researchers and decision-makers should consider modeling to cover for the unsteadiness in coronavirus cases to achieve better results.

Disasters and international business: Insights and recommendations from a systematic review

Disasters – natural or manmade – are on the rise with far-reaching implications for international business (IB) actors and transactions. While the Covid-19 pandemic has generated much academic interest for its impact on business in general, little effort has been made to consolidate the fragmented research on disasters more broadly in the field of international business. Therefore, it is important and urgent to consolidate the existing knowledge to provide a solid basis for future research. We systematically review 132 articles published between 1991 and 2022 and critically evaluate the nascent but rapidly growing literature at the intersection of disasters and IB. Our examination of the different types of disasters (natural and manmade) shows two separate streams: (1) a dominant MNE-centric stream of strategic IB research which regards disaster as an exogenous shock impacting MNE strategies, responses, and resilience, and (2) an emergent stream which places disaster as a more central, embedded phenomenon of investigation impacted by MNEs and other global actors. Our systematic review highlights the gaps in this literature and concludes with a discussion of the intersection of IB-disasters in relation to the 17 United Nations' Sustainable Development Goals (SDGs) to suggest directions for future research.

Economic impact of COVID-19 across national boundaries: The role of government responses

This Research Note provides an assessment of the burgeoning interdisciplinary literature surrounding the COVID-19 pandemic and its impact on both individuals and firms, with a particular focus on the heterogeneity in government responses and their implications for international finance and IB research. In particular, we discuss disparities in vaccine distribution, government policy responses, and impacts in low-income versus high-income countries, as well as lessons learned from the pandemic. We describe an important source of data in this area and provide ideas for future research.

Effective risk management in the shadow of COVID-19 pandemic: The evidence of Indonesian listed corporations

The study uses COVID-19 to identify the treatment group as the difference in change of non-financial corporations (NFCs) risk management ratios over time to investigate the causal effect of the NFCs' effective risk management (ERM) practices on operational efficiency (OE). ERM was measured by solvency and liquidity ratios, while the risk management theory was developed to refine the scope of the study. The data were collected from the central bank of Indonesia to map the empirical analysis, and the difference in difference (DID) technique was used to illustrate how NFCs react to mitigate the negative impact of COVID-19 and generate OE. Specifically, a quasi-natural experiment was used to size the effect of ERM practices on corporate OE during the COVID-19 pandemic. The descriptive analysis revealed that the COVID-19 pandemic effect has been unequal across different industrial sectors. Moreover, the empirical findings showed that corporate risk management during COVID-19 is the source of structural change, which affects its existence and operational efficiency. While debt amount and age may affect corporate credit score, ERM practices led the indebted corporation to the flexibility of debt refinancing or/and restructuring, which offers them the ability to prevent bankruptcy and adapt to the changes while operating efficiently. The finding revealed evidence of the important role of long-term debt in offering protection to NFCs during the credit supply shock brought in by the COVID-19 pandemic. Furthermore, the findings show that long-term debt is negatively associated with corporate OE. This was expected given that corporations use long-term debt financing for long-term investment, while short-term debt funds the working capital. Thus, to assess the effect of debts on corporate OE, managers should consider their maturity structure, among other factors.

International taxation sentiment and COVID-19 crisis

Investigating public sentiment regarding tax policy during the COVID-19 pandemic could be useful for understanding the experiences across societies. Using Linguistic Inquiry and Word Count to investigate and quantitatively measure the pandemic's effect-from January 25 to April 9, 2020-on the sentiment regarding possible tax policies throughout the world, thereby determining that, overall, taxation sentiment is reduced as the number of confirmed COVID-19 cases grows. Further investigation reveals that, as COVID-19 spreads, the sentiment for raising taxes decreases and that for reducing taxes increases, and this effect is mitigated by countries' democracy. We further find that news sentiment in unofficial media and in countries with low social trust is more significantly affected by COVID-19. Robustness tests performed using different subsamples of developed and developing countries and different pandemic circumstances validate our findings. This research has crucial implications for policy evaluation and development.

Segmentation of African Countries based on Infection and Death Rates of COVID-19 before Vaccination: A Rigid Population to Source for Workforce Amidst the Pandemic?

This study established segments among African countries to show the hierarchies of COVID-19 infection and death rates across the continent before the commencement of vaccination. Four clusters were extracted, each consisting of countries with a similar number of cumulative infections and deaths per 100 thousand population. When compared with the pre-vaccination figures from Europe, Americas, and Asia, it was observed that the African population exhibited a good level of rigidity and resilience to the pandemic, pre-vaccination. Majority of African countries - evaluating to 84% - were clustered into the segment with low infection and low death rates. Only 4% of the countries were clustered into the higher infection and highest death rates segment. This is an indication of the rigidity of a greater part of the African population to COVID-19 before vaccination. To forestall total business shutdown in the event of a similar pandemic in the future, multinational corporations could explore their workforce from the African population given the level of rigidity exhibited pre-vaccination.

What does COVID-19 teach us about the role of national culture? Evidence from social distancing restrictions

In this paper, we exploit the immediacy, magnitude, and global extent of the COVID-19 shock to investigate the role of national culture in determining differences in publicly imposed social distancing restrictions. Employing the Stringency Index of the Oxford COVID-19 Government Response Tracker database for 85 countries, we find that countries with higher values of Hofstede’s power distance adopted more stringent social distancing measures in response to COVID-19. In contrast, countries with more heightened individualism and long-term orientation implemented fewer such policies. Further, culture impacts the quickness to adopt social distancing policies. Results are robust to using alternative measures of national culture and controlling for endogeneity. They are also robust to extending the sample to the end of June 2021, using daily observations. Results suggest that societies rich in the cultural qualities of individualism and long-term orientation, often seen as promoting economic cooperation and stability, are less effective at dealing with sudden and transformative public policy crises than those with high levels of power distance. Results confirm the potent role of national culture in impacting institutions.

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

Using 1,584 listed banks from 64 countries during the COVID-19 pandemic, we conduct the first broad-based international study of the effect of the pandemic on bank systemic risk. We find the pandemic has increased systemic risk across countries. The effect operates through government policy response and bank default risk channels. Additional analysis suggests that the adverse effect on systemic stability is more pronounced for large, highly leveraged, riskier, high loan-to-asset, undercapitalized, and low network centrality banks. However, this effect is moderated by formal bank regulation (e.g., deposit insurance), ownership structure (e.g., foreign and government ownership), and informal institutions (e.g., culture and trust).