CUFE-BS Academic Seminar: The Impact of COVID-19 on Supply Chain Credit Risk

Time: 14:00-16:00 PM, 3 November 2020

Location: Room 615, CUFE Business School

Speaker: Dr.Wu Jing, Assistant Professor

Dr.Wu Jing works in the Department of decision science and management economics, CUHK School of business, the Chinese University of Hong Kong. He is also an executive member of the Hong Kong Shenzhen joint financial research center. He holds a doctorate and an MBA from Booth School of business, University of Chicago, and a bachelor's degree in electronic engineering from Tsinghua University. The main research fields are operation and finance, global supply chain, economic network and big data application. The research papers are published in management science, M & SOM and other top journals. He also provided consulting services to a financial technology company in Hong Kong and asset management companies in the mainland. Before returning to China, he worked as a quantitative strategist at Deutsche Bank in New York.

Abstract:

We examine how supply chain activity reflects into credit risk during different phases of the COVID-19 pandemic by focusing on CDS spreads and US-China supply chain links. We find considerable effects on credit risk propagation. CDS spreads for _rms with China supply chain partners increase with supply chain disruptions during the economic shutdown period of the pandemic, and the spreads go down when the economic activity resumes with re-opening in China. The household demand channel is an important driver of this supply chain credit risk behavior. Supply chain activity resumption is not sufficient to decrease credit risk in sectors that cater to households when the local economy suffers from dampened household spending due to economic shutdowns. Having a more global customer base, on the other hand, mitigates the local household demand shock effects. While firm leverage and supply chain duration magnify supply chain driven credit risk during the pandemic, cash holdings, growth opportunities, investment-grade rating, and supply chain network centrality moderate such effects.