IDEAS home Printed from https://ideas.repec.org/a/ers/journl/vxxivy2021ispecial1p53-68.html
   My bibliography  Save this article

Default Risk of Listed Companies in the Context of the Threat to Commodity Markets in the Times of COVID-19 Pandemic

Author

Listed:
  • Marek Szturo
  • Bogdan Wlodarczyk
  • Konrad Szydlowski
  • Karol Wojtowicz
  • Sylwia Pienkowska-Kamieniecka
  • Ireneusz Miciula

Abstract

Purpose: The purpose of this study was to identify the threat of default risk among commodity-related companies in European equity markets. Design/Methodology/Approach: Determination of the default risk of companies listed on several stock exchanges followed the Merton model by comparing the probability of bankruptcy in the time intervals from 1 January 2019 to 30 June 2019, and from 1 January 2020 to 30 June 2020. The calculations were based on data from the Wall Street Journal database. The companies selected for the study represent the main indexes of five European stock exchanges. In total, the analysis covers 40 commodity-related companies and 20 companies from the control groups. Findings: It was observed that commodity-related companies stood out against the control group in terms of default risk in the times of Covid-19 pandemic. The growing risk of default among stock market companies from significant European stock exchanges is a threat which - if unrecognized - may lead to a new financial crisis that can undermine the foundations of European economy. Practical Implications: The research results can be used by financial institutions in the process of creating a more customized approach to the modeling of credit risk of commodity-related companies. This will enable rationalization of risk management costs. Originality/Value: This study lies in the research area orientated towards exploration of relations between types of risks, which is an original aspect of this paper. More broadly, the research seeks to build risk assessment models that will be more adaptable to actual market situations in the times of Covid-19 pandemic.

Suggested Citation

  • Marek Szturo & Bogdan Wlodarczyk & Konrad Szydlowski & Karol Wojtowicz & Sylwia Pienkowska-Kamieniecka & Ireneusz Miciula, 2021. "Default Risk of Listed Companies in the Context of the Threat to Commodity Markets in the Times of COVID-19 Pandemic," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 53-68.
  • Handle: RePEc:ers:journl:v:xxiv:y:2021:i:special1:p:53-68
    as

    Download full text from publisher

    File URL: https://ersj.eu/journal/2028/download
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Luis Felipe Céspedes & Andrés Velasco, 2012. "Macroeconomic Performance During Commodity Price Booms and Busts," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(4), pages 570-599, December.
    2. Varangis, Panos & Larson, Don, 1996. "Dealing with commodity price uncertainty," Policy Research Working Paper Series 1667, The World Bank.
    3. Hegerty, Scott W., 2016. "Commodity-price volatility and macroeconomic spillovers: Evidence from nine emerging markets," The North American Journal of Economics and Finance, Elsevier, vol. 35(C), pages 23-37.
    4. Kablan, Sandrine & Ftiti, Zied & Guesmi, Khaled, 2017. "Commodity price cycles and financial pressures in African commodities exporters," Emerging Markets Review, Elsevier, vol. 30(C), pages 215-231.
    5. Eleftherios J. Thalassinos & Evagelos D. Politis, 2011. "International Stock Markets: A Co-integration Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 113-130.
    6. Scott R Baker & Nicholas Bloom & Steven J Davis & Kyle Kost & Marco Sammon & Tasaneeya Viratyosin & Jeffrey Pontiff, 0. "The Unprecedented Stock Market Reaction to COVID-19," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 10(4), pages 742-758.
    7. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    8. Algieri, Bernardina & Leccadito, Arturo, 2017. "Assessing contagion risk from energy and non-energy commodity markets," Energy Economics, Elsevier, vol. 62(C), pages 312-322.
    9. Achzet, Benjamin & Helbig, Christoph, 2013. "How to evaluate raw material supply risks—an overview," Resources Policy, Elsevier, vol. 38(4), pages 435-447.
    10. Machiko Nissanke, 2010. "Issues and Challenges for Commodity Markets in the Global Economy: An Overview," Palgrave Macmillan Books, in: Machiko Nissanke & George Mavrotas (ed.), Commodities, Governance and Economic Development under Globalization, chapter 3, pages 39-63, Palgrave Macmillan.
    11. Editorial, 2020. "Covid-19 and Climate Change," Journal, Review of Agrarian Studies, vol. 10(1), pages 5-6, January-J.
    12. Akram, Q. Farooq, 2009. "Commodity prices, interest rates and the dollar," Energy Economics, Elsevier, vol. 31(6), pages 838-851, November.
    13. van Dalen, Hendrik Peter & Henkens, C.J.I.M., 2020. "The COVID-19 pandemic : Lessons for financially fragile and aging societies," Other publications TiSEM 334fdc87-e5e7-411f-818b-7, Tilburg University, School of Economics and Management.
    14. Machiko Nissanke & George Mavrotas (ed.), 2010. "Commodities, Governance and Economic Development under Globalization," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-27402-0, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michał Bańka & Mariusz Salwin & Roman Tylżanowski & Ireneusz Miciuła & Monika Sychowicz & Norbert Chmiel & Adrian Kopytowski, 2023. "Start-Up Accelerators and Their Impact on Entrepreneurship and Social Responsibility of the Manager," Sustainability, MDPI, vol. 15(11), pages 1-32, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yang, Lu & Cui, Xue & Yang, Lei & Hamori, Shigeyuki & Cai, Xiaojing, 2023. "Risk spillover from international financial markets and China's macro-economy: A MIDAS-CoVaR-QR model," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 55-69.
    2. Julien Chevallier, 2020. "COVID-19 Outbreak and CO 2 Emissions: Macro-Financial Linkages," JRFM, MDPI, vol. 14(1), pages 1-18, December.
    3. Ma, Richie Ruchuan & Xiong, Tao, 2021. "Price explosiveness in nonferrous metal futures markets," Economic Modelling, Elsevier, vol. 94(C), pages 75-90.
    4. Yao, Wei & Alexiou, Constantinos, 2022. "Exploring the transmission mechanism of speculative and inventory arbitrage activity to commodity price volatility. Novel evidence for the US economy," International Review of Financial Analysis, Elsevier, vol. 80(C).
    5. Werth, Annette & Gravino, Pietro & Prevedello, Giulio, 2021. "Impact analysis of COVID-19 responses on energy grid dynamics in Europe," Applied Energy, Elsevier, vol. 281(C).
    6. Si, Deng-Kui & Li, Xiao-Lin & Xu, XuChuan & Fang, Yi, 2021. "The risk spillover effect of the COVID-19 pandemic on energy sector: Evidence from China," Energy Economics, Elsevier, vol. 102(C).
    7. repec:ocp:ppaper:pb1824 is not listed on IDEAS
    8. Gong, Xu & Xu, Jun, 2022. "Geopolitical risk and dynamic connectedness between commodity markets," Energy Economics, Elsevier, vol. 110(C).
    9. Afees Adebare Salisu & Idris A. Adediran, 2018. "The U.S. Shale Oil Revolution and the Behavior of Commodity Prices," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 3(1), pages 27-53, September.
    10. Alice Nicole Sindzingre, 2011. "The Conditions for Long-Term Growth in Sub-Saharan Africa: China as a Model, a Contraint and an Opportunity," Post-Print halshs-03604139, HAL.
    11. Boako, Gideon & Alagidede, Imhotep Paul & Sjo, Bo & Uddin, Gazi Salah, 2020. "Commodities price cycles and their interdependence with equity markets," Energy Economics, Elsevier, vol. 91(C).
    12. Pauline Bucciarelli & Emmanuel Hache & Valérie Mignon, 2024. "Evaluating criticality of strategic metals: Are the Herfindahl–Hirschman Index and usual concentration thresholds still relevant?," Working Papers hal-04452384, HAL.
    13. Yao, Wei & Alexiou, Constantinos, 2024. "On the transmission mechanism between the inventory arbitrage activity, speculative activity and the commodity price under the US QE policy: Evidence from a TVP-VAR model," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1054-1072.
    14. Ahundjanov, Behzod B. & Akhundjanov, Sherzod B. & Okhunjanov, Botir B., 2021. "Risk perception and oil and gasoline markets under COVID-19," Journal of Economics and Business, Elsevier, vol. 115(C).
    15. Jin, Jiayu & Han, Liyan & Xu, Yang, 2022. "Does the SDR stabilize investing in commodities?," International Review of Economics & Finance, Elsevier, vol. 81(C), pages 160-172.
    16. Nozawa, Yoshio & Qiu, Yancheng, 2021. "Corporate bond market reactions to quantitative easing during the COVID-19 pandemic," Journal of Banking & Finance, Elsevier, vol. 133(C).
    17. Afees A. Salisu & Idris Adediran, 2018. "US shale oil and the behaviour of commodity prices," Working Papers 047, Centre for Econometric and Allied Research, University of Ibadan.
    18. Nissanke, Machiko, 2019. "Exploring macroeconomic frameworks conducive to structural transformation of sub-Saharan African economies," Structural Change and Economic Dynamics, Elsevier, vol. 48(C), pages 103-116.
    19. Charles Gore, 2010. "The global recession of 2009 in a long-term development perspective," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(6), pages 714-738.
    20. Donders, Pablo & Jara, Mauricio & Wagner, Rodrigo, 2018. "How sensitive is corporate debt to swings in commodity prices?," Journal of Financial Stability, Elsevier, vol. 39(C), pages 237-258.
    21. Gady Jacoby & Chuan Liao & Jonathan A. Batten, 2007. "A Pure Test for the Elasticity of Yield Spreads," The Institute for International Integration Studies Discussion Paper Series iiisdp195, IIIS.

    More about this item

    Keywords

    Market risk; default risk; commodity market; equity market; coronavirus pandemic.;
    All these keywords.

    JEL classification:

    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ers:journl:v:xxiv:y:2021:i:special1:p:53-68. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marios Agiomavritis (email available below). General contact details of provider: https://ersj.eu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.