Special Issue on the Pandemic Research

This special issue of Emerging Markets Finance and Trade contains a combination of papers on the pandemic research selected from the “Pandemics: Lessons from an Economics and Finance Perspective” workshop hosted by Jilin University, China in October 2020 and Shandong University, Weihai, China in January 2021. At these workshops, over 40 papers were presented. These invited papers were selected following the journal’s usual peer review process. Following this process, this special issue contains 17 papers.

These papers cover a wide range of topics on the broad theme of the pandemic research. We provide a summary of what these papers do and finish our editorial note with implications for future research, particularly considering the pandemic COVID-19.

The first four papers focus on the stock market performance. Xiaoxu Kong, Fei Jiang, and Xuexin Liu, for instance, examine the role of strategic deviance, diversification, their interaction, and managerial power on China’s enterprise resilience (ER) during the pandemic COVID-19 period. They document that when managers enjoy great power, diversification has no significant impact on the ER, while strategic deviance has a significant impact on ER. The second paper by Xuesheng Chen, Caixia Liu, Feng Liu, and Mingjie Fang investigates the relationship between the pandemic COVID-19, customer concentration, and sustainable growth of Chinese firms. They note that COVID-19 has a negative impact on sustainable growth, however, the customer concentration can mitigate this negative shock of COVID-19 and help in promoting sustainable development of Chinese firms.

Additionally, Ping Zhang, Jieying Gao, and Xingchao Li investigate the impact of stock liquidity on firm value of A-listed companies in China during the COVID-19 period. They document a statistically significant and negative relationship between stock liquidity and firm value during the first three days of the COVID-19 outbreak while it later changed to a positive relationship. The fourth paper by Di Yuan, Feipeng Zhang, Fenghui Cui, and Shuo Wang explores the interdependence and contagion between oil price and BRIC stock markets before and during COVID-19 period. They concluded except in the case of China, the linkages between the crude oil and BRIC stock markets significantly increased during the COVID-19 turmoil.

The paper by Hongyuan Zhang, Yibing Ding, and Jing Li examines the impact of the pandemic COVID-19 on economic sentiment using data for 36 countries. They observed significant fluctuations in economic sentiment during the outbreak of COVID-19. They further noted COVID-19 has a statistically significant and negative impact on economic sentiment and industrial confidence, however, it has a positive effect on consumer confidence. On the other hand, the sixth paper by Lu Zhou, Hua Qiu, and Xinyu Zhang shows that the negative market sentiment due the pandemic COVID-19 cannot be offset by the short-term positive effects of corporate donations.

In the seventh paper, Tiezhu Sun, Weiwei Zhang, Xiaobo Xu, and Li Zhang study the impact of economic policy uncertainty (EPU) in home and host countries on the choice of foreign establishment mode for 777 foreign subsidiary establishments made by the Chinese firms. They find firms prefer M&A over greenfield investment as the establishment mode when the host country is experiencing high EPU.

In the next three papers, the focus is on the performance of small and medium-sized enterprises (SMEs) or the household-owned businesses in China. For instance, Liangyu Zhang, Haolin Zhang, Xinye Yu, and Yongqi Feng document that the supporting policies implemented for Chinese SMEs during the COVID-19 period are found to beneficial for the recovery of wholesale enterprises while they are found not beneficial for manufacturing, transportation, and information transmission industries. Quanyun Song, Jun Du, and Yu Wu note that loans for small businesses in the areas severely affected by the pandemic have lower costs, shorter maturities, larger amounts, and are provided mostly with unsecured loans. They further document that the easy monetary policies during the pandemic are found to be beneficial for small business financing. Finally, Pengpeng Yue, Aslihan Korkmaz, Zhichao Yin, and Haigang Zhou show that the pandemic has a negative impact on the gross income of household-owned business.

Shixian Ling, Tianyue Pei, Zhaohui Li, and Zhiping Zhang’s paper is the 11^th in this issue. They show that while COVID-19 increased enterprises’ financial constraints, the development of financial technology helps mitigate the adverse negative effect of the pandemic on Chinese listed firms.

The next two papers by Zhaomin Ren and Shi Li, Haoyu Gao, Huiyu Wen, and Shujiaming Yu are on analysts forecast. Ren and Li show that the return predictability of analysts forecast revision is negatively correlated with the severity of the pandemic because analysts did not provide sufficient information to investors during the pandemic period. Gao et al. show that the unexpected inter-area mobility restrictions imposed during the pandemic significantly increased the analysts forecast dispersion for firms in pandemic exposed areas.

The 14^th and 15^th papers of this issue focus on macro expects of Chinese economy. For instance, Yu Zhao, Hongyuan Zhang, Yibing Ding, and Sitong Tang document that COVID-19 had a negative and statistically significant effect on China’s export. Additionally, Yichao Mo, Ding Liu, and Weihong Sun noted that SARS pandemic had both temporary and persistent adverse effect on China’s output. The temporary effect lasted only for one-quarter but the prolonged effect remined for approximately two years.

The second last paper by Ghulame Rubbaniy, Ali Khalid, and Aristeidis Samitas explores the co-movement between COVID-19 fear index, cryptocurrency implied volatility index, and cryptocurrency returns. They find that a non-financial market-based proxy of market stress reveals cryptocurrency as a safe-haven asset while a financial-based proxy of market turbulence exposes that cryptocurrencies just behave like traditional assets during the times of pandemic COVID-19.

The last paper by Yiwei Wang, Ke Wang, and Quan-Jing Wang shows that there is a long-term bidirectional nexus between atmospheric quality and the epidemics in a panel of 69 countries. Additionally, they note that carbon dioxide emissions of the industrial and transportation sectors of more developed economies show greater evidence of cointegration between atmospheric quality and epidemics.

This special issue, together with the previous two have enriched the literature on understanding the effects of pandemic on emerging economies. With more availability of data, we see a growing trend on the discussion of international trade and investment, and more in-depth discussion on firm behaviour and causality identification techniques. The evolution of such is encouraging, nonetheless, further research is demanded in following aspects.

First, researchers need to ask whether the impact of the pandemic is persistent over time? Some studies have already started exploring this but have naturally been constrained by data (see Ertuğrul, Güngör, Soytaş, 2020; Kartal, 2020; Narayan, 2020a; Narayan, Devpura, Wang, 2020; Narayan, Gong, Aliahmed, 2020; Polemis and Soursou, 2020; Sharma, 2020; Fu and Chang, 2021). The key questions are: (a) what is the time path of persistency and (b) what are the key determinants of this persistent behavior (assuming persistent effect is present)? With (a) researchers need time series models. Some of the time-varying models of potential use and extensions are Devpura (2021), Devpura, Narayan, and Sharma (2018), Narayan and Sharma (2018), Devpura and Narayan (2020), Gurrib, Kweh, Contu, and Kamalov (2020), Liu, Wang, and Lee (2020), Bal and Mohanty (2021), Bing (2021), and Fasanya, Oyewole, Oliyide (2021); With (b), there is scope for extension of work in multiple dimensions. First, a conceptual framework can be developed based on the determinants of persistent behavior in macroeconomic or financial data due to shocks. Researchers working in this area will need to connect to macroeconomic and/or financial economic theories such as the efficient market hypothesis, the purchasing power parity, and business cycle models just to name a few by way of a guide. Second, there is potential to innovation on measures of the COVID-19 pandemic. In others words, apart from using the conventional measures like the death rate, COVID-19 cases, and the various indices drawn out of this, authors can innovate by constructing their own sentiment-based variables. While challenging, this is where we believe lies the greatest scope for contribution. This also represents an avenue for robustness test.

Second, how quickly do firms and households recover from the effects of pandemic? This is a question unaddressed yet but carries significant policy interests. The debt levels of households and nations have reached record-levels globally in the fight against the pandemic. Recent econometric methods provide a tool for future researchers to begin testing for speed of adjustment from the pandemic shock; one such method is the partial adjustment panel econometric model of Narayan (2020b) and Westerlund, Karabiyik, Narayan (2021).

Third, the role of fintech and corporate social responsibility in alleviating pandemic shocks have been presented in this special issue. This is an appealing aspect of research with potential for policy implications. However, the research here relies on a sole index or categorical variable. Herein is scope for additional work, building on the use of more precise choice of variables and consideration rich econometric techniques to mitigate the endogeneity concern.