Effects of corporate financial distress on peer firms during COVID-19 in an emerging economy: Insights from Kosova
Session
Management, Business and Economics
Description
The onslaught of the COVID-19 pandemic has had a critical impact on some firms in an industry affect the conditional accounting conservatism of intra-industry non-distressed firms. We hypothesize that the lenders of non- distressed firms perceive higher riskiness and the need to take on debt, when some firms show signs of financial distress in that industry. Intra-industry non- distressed firms increase their levels of analyses of debt covenants and more efficient monitoring of debt contracts. In such a context, the research develops a model to analyze the impact to meet the lenders’ demands for stricter monitoring of debt contracts and to reduce debt costs. We provide new evidence for the spillover effects of financial distress within an industry and the usefulness of debt as a form to improve their sustainability. Results are based on a sample of 40 firms during December 2020-January 2021.
Keywords:
Financial distress, costs of debt, Covid 19
Proceedings Editor
Edmond Hajrizi
ISBN
978-9951-550-50-5
Location
UBT Kampus, Lipjan
Start Date
29-10-2022 12:00 AM
End Date
30-10-2022 12:00 AM
DOI
10.33107/ubt-ic.2022.398
Recommended Citation
Sylejmani, Blinera, "Effects of corporate financial distress on peer firms during COVID-19 in an emerging economy: Insights from Kosova" (2022). UBT International Conference. 407.
https://knowledgecenter.ubt-uni.net/conference/2022/all-events/407
Effects of corporate financial distress on peer firms during COVID-19 in an emerging economy: Insights from Kosova
UBT Kampus, Lipjan
The onslaught of the COVID-19 pandemic has had a critical impact on some firms in an industry affect the conditional accounting conservatism of intra-industry non-distressed firms. We hypothesize that the lenders of non- distressed firms perceive higher riskiness and the need to take on debt, when some firms show signs of financial distress in that industry. Intra-industry non- distressed firms increase their levels of analyses of debt covenants and more efficient monitoring of debt contracts. In such a context, the research develops a model to analyze the impact to meet the lenders’ demands for stricter monitoring of debt contracts and to reduce debt costs. We provide new evidence for the spillover effects of financial distress within an industry and the usefulness of debt as a form to improve their sustainability. Results are based on a sample of 40 firms during December 2020-January 2021.