The Calm Before the Storm : Early Evidence on Business Insolvency Filings After the Onset of COVID-19
The Coronavirus (COVID-19) pandemic brought forward an unprecedented economic contraction. Recessions, in turn, have typically been accompanied by an increase in the number of firms using the insolvency system. This note explores the early impact t...
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| Format: | Brief |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/962221615273849133/The-Calm-Before-the-Storm-Early-Evidence-on-Business-Insolvency-Filings-After-the-Onset-of-COVID-19 http://hdl.handle.net/10986/35261 |
| Summary: | The Coronavirus (COVID-19) pandemic
brought forward an unprecedented economic contraction.
Recessions, in turn, have typically been accompanied by an
increase in the number of firms using the insolvency system.
This note explores the early impact the pandemic has had on
business insolvency filings, based on information from a
newly created dataset. Contrary to early expectations, most
economies surveyed have experienced a decline in the number
of business insolvencies relative to Q2 and Q3 of 2019.
shows that legal reasons may have played a key role in this
decline as almost all economies covered introduced emergency
measures making it more difficult to push a debtor into
insolvency. Looking forward, the note explores evidence from
previous crisis together with underlying factors -such as
lower sales, higher unemployment, firm liquidity challenges,
and heightened corporate vulnerabilities- to investigate
whether the risk of a wave of insolvencies has disappeared.
The analysis suggests that a rise in insolvency filings is
likely to have just been postponed, renewing the calls to
strengthen insolvency frameworks in EMDEs. |
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