A New Approach for Risk of Corporate Bankruptcy Assessment during the COVID-19 Pandemic

Katarzyna Boratyńska
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Katarzyna Boratyńska: Department of Finance, Institute of Economics and Finance, Warsaw University of Life Sciences—SGGW, Nowoursynowska 166 Street, 02-787 Warsaw, Poland

JRFM, 2021, vol. 14, issue 12, 1-14

Abstract: The consequences of COVID-19 will aggravate existing multidimensional risks and reveal new ones. The research gap allows contributing to recognizing the exogenous risk factors of corporate bankruptcy during the COVID-19 pandemic in EU countries. This study aims at revealing how to evaluate the risk of corporate bankruptcy phenomenon in the COVID-19 times. The question arises as to whether Schumpeter’s creative destruction approach is still accurate. The article concentrates on implementing the fsQCA (fuzzy set Qualitative Comparative Analysis) method to identify and evaluate the main exogenous drivers of corporate bankruptcy in EU countries based on Fragile States Index data. This new approach focuses on fuzzy sets theory. The fsQCA method is a globally recognized alternative to quantitative analysis (in which the causal complexity is ignored) and qualitative methods for examining individual cases (which do not have the tools to generalize on their basis). The research indicates and examines the main external factors that would increase the risk of corporate bankruptcy in EU countries: namely, economic decline, uneven economic development, unemployment rate, demographic pressure, and government debt. The study discusses the influence of zombie companies on economies during the COVID-19 pandemic. Identifying risk factors that determine the threat of corporate bankruptcy may constitute practical recommendations for business and restructuring practitioners, financial institutions, and banking and public sector representatives in creating warning and recovery measures during the COVID-19 pandemic.

Keywords: risk of corporate bankruptcy; the COVID-19 pandemic; uncertainty; zombie companies (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
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