Risk contagion of COVID-19 in Japanese firms: A network approach |
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Affiliation: | College of Commerce, Nihon University, 5-2-1, Kinuta, Setagaya, Tokyo 157-8570, Japan |
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Abstract: | The novel coronavirus disease (COVID-19) is one of the worst pandemics in human history. Our research objective is to assess the contagion effect on Japanese firms and to evaluate the Japanese government's COVID-19 measures during the period from April 7, 2020, to May 25, 2020. We propose a susceptible-infected-recovered-dead model for COVID-19 and derive COVID-19 parameters for Japan. Subsequently, we analyze the effect of COVID-19 on Japanese firms through correlation-based network and credit risk analyses. The main findings are that the Tokyo Stock Price Index moved in the opposite direction of COVID-19 parameters and COVID-19 parameters are almost the only risk factors that impact a firm's credit risk during the period. Finally, we find that the interconnection analysis between the COVID-19 infection network and the financial networks contribute to the existing pandemic risk management knowledge. |
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Keywords: | COVID-19 Risk contagion Susceptible-infected-recovered-dead (SIRD) model Correlation-based network Stock market Net cash |
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