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Risk contagion of COVID-19 in Japanese firms: A network approach

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  • Kanno, Masayasu

Abstract

The novel coronavirus disease (COVID-19) is one of the worst pandemics in human history. Our research objective is to assess the contagion effect on Japanese firms and to evaluate the Japanese government's COVID-19 measures during the period from April 7, 2020, to May 25, 2020. We propose a susceptible-infected-recovered-dead model for COVID-19 and derive COVID-19 parameters for Japan. Subsequently, we analyze the effect of COVID-19 on Japanese firms through correlation-based network and credit risk analyses. The main findings are that the Tokyo Stock Price Index moved in the opposite direction of COVID-19 parameters and COVID-19 parameters are almost the only risk factors that impact a firm's credit risk during the period. Finally, we find that the interconnection analysis between the COVID-19 infection network and the financial networks contribute to the existing pandemic risk management knowledge.

Suggested Citation

  • Kanno, Masayasu, 2021. "Risk contagion of COVID-19 in Japanese firms: A network approach," Research in International Business and Finance, Elsevier, vol. 58(C).
    • Handle: RePEc:eee:riibaf:v:58:y:2021:i:c:s0275531921001124
    DOI: 10.1016/j.ribaf.2021.101491
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    References listed on IDEAS

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    2. Kanno, Masayasu, 2015. "Assessing systemic risk using interbank exposures in the global banking system," Journal of Financial Stability, Elsevier, vol. 20(C), pages 105-130.
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    7. Kanno, Masayasu, 2021. "Assessing the impact of COVID-19 on major industries in Japan: A dynamic conditional correlation approach," Research in International Business and Finance, Elsevier, vol. 58(C).
    8. Cleo Anastassopoulou & Lucia Russo & Athanasios Tsakris & Constantinos Siettos, 2020. "Data-based analysis, modelling and forecasting of the COVID-19 outbreak," PLOS ONE, Public Library of Science, vol. 15(3), pages 1-21, March.
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    Cited by:

    1. Demir, Ender & Danisman, Gamze Ozturk, 2021. "Banking sector reactions to COVID-19: The role of bank-specific factors and government policy responses," Research in International Business and Finance, Elsevier, vol. 58(C).
    2. Ahmad, Wasim & Kutan, Ali M. & Chahal, Rishman Jot Kaur & Kattumuri, Ruth, 2021. "COVID-19 Pandemic and firm-level dynamics in the USA, UK, Europe, and Japan," International Review of Financial Analysis, Elsevier, vol. 78(C).
    3. Mbatha, Vusisizwe Moses & Alovokpinhou, Sedjro Aaron, 2022. "The structure of the South African stock market network during COVID-19 hard lockdown," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 590(C).

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    More about this item

    Keywords

    COVID-19; Risk contagion; Susceptible-infected-recovered-dead (SIRD) model; Correlation-based network; Stock market; Net cash;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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