The Effect of COVID-19 Fear Sentiment on Banks’ Performance in Emerging Markets

Myvel Nabil and Amr Hussein Elalfy

International Business Research, 2022, vol. 15, issue 5, 39

Abstract: The current situation of the COVID-19 pandemic is poking fear of falling sick, dying, and stigma. Urgent and timely understanding of explaining bank performance with a pandemic sentiment is needed, especially, the literature presented little evidence of this issue. Hence, the researchers investigate the impact of the fear sentiment, measured by a Country Fear Index (CFI) on banks’ performance daily since the onset of the crisis. In addition, we demonstrate the impact of investor assessment, measured through the price-to-book value ratio, on the banks’ performance for 10 emerging markets, focusing on MENA and BRICS countries. We find that the stock performance of banks in emerging markets counties was significantly driven by investors’ irrational fear sentiment. The results reveal the impact significance of CFI on the performance of bank stocks, most notably on the risk side. Hence, results indicate that CFI can be used to predict bank stocks’ risk during crises.

Date: 2022
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