Ex-ante risk management and financial stability during the COVID-19 pandemic: a study of Vietnamese firms

Abstract

Purpose The authors investigate whether firms can ensure their financial stability during the coronavirus disease 2019 (COVID-19) pandemic by having ex-ante risk management. Design/methodology/approach The authors study 279 Vietnamese listed firms by investigating their disclosure of risk awareness and risk management tool(s) in the 2019 annual reports. The authors then examine whether prior risk awareness and adoption of risk management tool(s) can enhance the firms' financial ratios during the COVID-19 pandemic. Findings The authors find that firms that disclose their risk management tool(s) in the 2019 annual reports have better asset utilization and higher liquidity during the COVID-19 pandemic than the others. However, firms that simply express their risk awareness exert no stronger financial stability. In addition, the authors document that debt management is the most popular and most effective tool to ensure firms' financial stability during the crisis. Originality/value The study highlights the need for ex-ante risk management for future pandemics. The authors also suggest that stakeholders can rely on the degree of risk management tool utilization to evaluate the financial stability of firms.