The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/2044-1398.htm

Ex-ante risk management and Financial

stability during
financial stability during the COVID-19

COVID-19 pandemic: a study of

Vietnamese firms 349
Lan Thi Mai Nguyen and Phi Hoang Dinh Received 24 December 2020
Revised 22 February 2021
Hanoi School of Business and Management, Vietnam National University, 15 March 2021
Hanoi, Vietnam Accepted 4 April 2021

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.
Keywords COVID-19 pandemic, Crisis, Economic shock, Financial stability, Risk awareness, Risk
management tools
Paper type Research paper

1. Introduction
The coronavirus disease 2019 (COVID-19) pandemic has caused several destructions to the
economy, which resulted in the forced closure of many firms and economic activities. The
main reason for this is the solvency problem, in which firms are unable to pay back their debt
and/or to sponsor their everyday business. In Vietnam, banks reported an increase of bad
debts by 11% to 29% (tapchitaichinh.vn, accessed in 2020). A survey by the General
Statistics Office of Vietnam in April 2020 (GSO, 2020a) also revealed that, due to the impact of
the pandemic, 66.8% of Vietnamese firms had to reduce salary expenses by laying off
employees or cutting salary. However, firms can have prior preparation for this unexpected
event by having ex-ante risk awareness and a method to manage risk. For example, firms can
employ debt management (DeAngelo and DeAngelo, 2007), excessive cash holdings (Lins
et al., 2010) or derivatives (Campello et al., 2011b) for risk hedging. A question that worths
further investigation is whether firms having prior risk awareness and/or adoption of risk
management tool(s) are better than the others in ensuring financial stability during the
pandemic crisis.
From a theoretical perspective, unfortunately, existing theories offer ambiguous view on
China Finance Review
the role of risk management. In light of the agency theory, it is postulated that risk International
management decision is undertaken by the firm managers, not shareholders. Thus, managers Vol. 11 No. 3, 2021
pp. 349-371
would select policies that maximize their personal benefit rather than maximizing © Emerald Publishing Limited
2044-1398
shareholders’ wealth (Jensen and Mechling, 1976; Stulz, 1984). Several studies lend support DOI 10.1108/CFRI-12-2020-0177
CFRI to this view. For example, Tufano (1998) argues that risk management is inefficient as
11,3 managers’ hedge for risk only to ensure that the firm has sufficient cash to invest in new
projects without raising new capital. This is to prevent them from the scrutiny of the capital
markets in case the project has negative net present value (NPV). Another study by Kumar
and Rabinovitch (2013) suggests that entrenched managers who seek personal benefit by
misusing the firm’s internal cash flows have the incentive to hedge for risk to ensure the
availability of external financing for the firm when it is needed.
350 In contrast, the argument drawn from the stewardship theory suggests that the interests
of managers and shareholder interests are aligned; thus managers’ decision is firm value-
enhancing. Under this view, prior studies have shown that risk management is beneficial for
the firm. For example, Smith and Stulz (1985) suggest that risk management helps reduce the
bankruptcy cost for firms. Graham and Rogers (2002) find that firms hedge for their risk to
raise debt capacity, which results in increased interest expense tax deductions and lowered
tax payment. A study by Carter et al. (2006) documents a positive relationship between risk
hedging and value-enhancing amongst airline firms in the US.
Thus, to provide an empirical answer to our research question, we utilized a sample of 279
listed firms in two exchanges: Ho Chi Minh Stock Exchange (HOSE) and Hanoi Stock Exchange
(HNX). The firms were selected based on the availability of annual reports and financial
information. We first manually collected risk management information from firms’ audited
annual reports for the year 2019. We focussed on whether a firm had a section that discussed
their risk and whether the firm also disclosed their risk management tool(s). We employed
financial ratios, which were classified into Efficiency ratios, Liquidity ratios and Profitability
ratios, to measure firm-level financial stability. We then study the change in the firm’s financial
ratios between the period before the pandemic (Quarter 1 and 2/2019) and during the pandemic
(Quarter 1 and 2/2020); and compare the change amongst firms that have prior risk awareness
and those that do not have. Any differences documented across the two groups of firms suggest
the effectiveness of prior risk awareness in ensuring financial stability.
Our results show that, on average, the financial situation of firms is severely affected by
the COVID-19 pandemic, and the impact is more detrimental in the second quarter of 2020.
Specifically, asset turnover sees a significant decline in Quarter 2/2020 compared to the same
quarter in 2019 (a decline of 11.6%). Account receivables (AR) turnover also declines, with a
reduction of 26.4%. Another prominent change is a drop in cash holding, with Cash/Total
assets ratio declines by 11.8%. Altogether, these signal a serious liquidity problem amongst
firms during the pandemic period.
Regarding the relationship between risk management and firm-level financial stability, we
find no clear evidence that ex-ante risk awareness, including the awareness of financial and
special risk, can help ensure the financial stability of firms during the pandemic period. In
contrast, we document that firms having disclosure of risk management tool(s) see no
significant change in their cash holding, whilst those having no such disclosure have a
significant decline in cash holding in both Quarter 1 and 2 of 2020, the decline of 15.7% and
14.4%, respectively. However, we document a significant decline of 52% in Net profit margin
of firms having risk management tool(s) in Quarter 2/2020 compared to Quarter 2/2019. These
results imply that the financial stability of firms having risk management tool(s) is
strengthened amidst the COVID-19 pandemic, whereas the other firms face liquidity
problems. But the strengthened financial ability comes at the cost of lower profitability.
We also classify risk management tools employed by the sampled firms into nine
categories, of which Debt management and Receivables management are the two most
popular tools that Vietnamese firms use for risk hedging, whilst Cost management and
Derivatives are the least popular. When evaluating the effectiveness of risk management
tools in ensuring firm-level financial stability, we find that Debt management shows the
highest effectiveness, followed by Receivables management and Derivatives.
 Our study has both theoretical and practical contributions. First, we add to the literature Financial
on risk management, which mostly focusses on evaluating how firm-level financial stability stability during
is affected by an economic shock, particularly the shock of the COVID-19 pandemic (Banerjee
et al., 2020; Didier et al., 2020; De Vito and Gomez, 2020) or analysing firms’ choice of risk
COVID-19
management tools (DeAngelo and DeAngelo, 2007; Lins et al., 2010; Campello et al., 2011b).
We, however, analyse the effectiveness of prior risk awareness and risk management in
ensuring the financial stability of firms when an economic shock suddenly occurs. This
research topic opens a direction for future study on the importance of risk awareness and risk 351
management in the sustainable growth of firms, particularly during periods of unfavourable
economic conditions.
Second, our findings highlight the hedging effectiveness of each risk management tool
during a crisis period, which is of great practical value to managers who are considering a
hedging method for their firms. Specifically, our results show that risk awareness is not as
important as having risk management tools; and that debt management, AR management
and derivatives are the three effective methods of risk management that Vietnamese firms
should consider employing. In addition, our study is informative for other stakeholders,
including banks, investors and policymakers who encounter substantial uncertainty in
making decisions due to the lack of business data. Specifically, stakeholders can use the
degree of risk management tool utilization of firms as a criterion to evaluate the firm’s
financial stability. Although our results are particularly applicable for Vietnamese firms, they
can also be generalized for firms from economies with similar characteristics. At the same
time, we provide a research framework that can be utilized by researchers worldwide to
perform similar studies on different samples. Altogether, these suggest highly practical
contribution of our research.
The remaining of our study is structured into four parts. Section 2 is our review of the
literature. In Section 3, we present our data and methodology. Section 4 reports our findings
and discussions. And Section 5 is our conclusion.

2. Literature review
2.1 Financial stability and risk management
In non-traditional security management, Hoang et al. (2019) argue that any security is
understood as the safety, stability and sustainability of the management actors and/or the
referent objects. And in the context of a highly competitive market resulting from a non-
traditional risk like the COVID-19 pandemic, financial security (including financial safety and
financial stability) becomes a new area of research that can benefit both business and non-
traditional security studies.
There are several definitions of financial stability, most of which refer to the stability of the
financial system of a whole economy. Instead, the definition provided by World Bank
mentions both firm-level and systematic financial stability. We, therefore, use World Bank’s
definition for our study with the focus on firm-level financial stability.
World Bank defines financial stability as the capability of “efficiently allocating resources,
assessing and managing financial risks, maintaining employment levels close to the
economy’s natural rate, and eliminating relative price movements of real or financial assets
that will affect monetary stability or employment levels” (World Bank, 2020). World Bank
favours the approach of the Merton model (Merton, 1974) to measure firm-level financial
stability as the ability to meet all financial obligations and to estimate the default possibility.
According to this definition, World Bank emphasizes that a stable financial system can
absorb unexpected financial imbalances to prevent any adverse effects these may have on
one firm or an economy. And this absorption is “primarily via self-corrective mechanisms.”
We, therefore, postulate that to ensure financial stability, firms should first and foremost
CFRI have a sound internal mechanism for risk management to absorb any unexpected economic
11,3 shocks.
The literature on risk management has identified some popular risk management tools for
firms to ensure financial stability. For example, DeAngelo and DeAngelo (2007) argue that
firms should adopt a capital structure with a low level of debt to reserve the opportunity to
borrow during a period of high need for liquidity. Similarly, Lins et al. (2010) conclude that line
of credit is an important source of liquidity to hedge for financial frictions in obtaining
352 external capital to fund valuable investment opportunities. Another tool to hedge for financial
risk is cash holdings. Lins et al. (2010) find that excessive cash holdings tend to be used as
insurance for future financial shortfalls. Campello et al. (2011a) also document that firms
having more cash tend to borrow less even though they pay a lower cost to access lines of
credit. Apart from the internal risk management methods, firms can hedge through the use of
derivatives. Campello et al. (2011b) suggest that by hedging with derivatives, firms have
lower external financing cost and less restriction in investment by lenders. The shortcoming
of derivative hedging, however, is that it can only hedge for certain types of risk, which may
not perfectly match the existing risk of firms (Almeida et al., 2014).

2.2 A comparison between the impact of the COVID-19 pandemic and the global financial
crisis
The COVID-19 pandemic started from late 2019 is so far one of the most devastating crises in
mankind history. Whilst this current crisis and the global financial crisis (GFC) in 2007–2008
are similar in the sense that both economic shocks are on a global scale and both seriously
damage the world economy, there are a few differences that distinguish the two. First, the
GFC results from an endogenous shock in which risks built up in the financial sector as credit
standards decline. When the bubble in the real estate market burst, the whole financial
markets froze, liquidity dried up and the effects then spread to other sectors of the economy,
causing an economic recession. In contrast, the economic crisis caused by the COVID-19
pandemic arises from an exogenous shock (i.e. an unexpected public health crisis) and causes
a prompt effect on all sectors of the economy. Businesses and schools were shut down, and
borders were closed, the whole economy froze at once. Because of this reason, the damage that
the COVID-19 pandemic has caused to the global economy is more detrimental. According to
Tooze (2020), the GFC in 2007–2008 caused a reduction of 2.1% in global gross domestic
product (GDP), whereas this current crisis so far (up until Quarter 2 of 2020) has caused a
decline of more than 5.5% in global GDP. Thus, the strategies of firms to survive this current
crisis cannot be the same as those for the previous crisis (Kuckertz et al., 2020).
The second difference between the economic crisis caused by the COVID-19 pandemic and
the GFC lies in the intervention of governments. During the GFC in 2007–2008, governments
worldwide offered several schemes to support the recovery of the economy, most of which are
financial policies that involve the acts of fiscal and monetary policies (Ding et al., 2013). By
contrast, during the COVID-19 pandemic, government intervention includes various actions
ranging from social, medical, educational, economic to financial measures (Sebastiani et al.,
2020). Whilst this comprehensive intervention is effective in controlling the widespread of the
disease; it results in a heavily damaged economy that requires an extended period of time to
recover.

2.3 Financial risk during the COVID-19 pandemic

During the COVID-19 pandemic, in the attempt to curve the disease, most countries have
implemented some kinds of social distancing, which forces businesses to operate under
minimum capacity. Although this policy is effective in safeguarding public health, it results
in several destructions to the financial stability of firms.
 First, an extended period of lockdown has resulted in a sudden decline in consumer Financial
demand for goods and services. This consequently leads to a fall in revenue of most firms. At stability during
the same time, many firms also face sticky operating expenses, which reduce at a slower rate
compared to revenue. Banerjee et al. (2020), while studying 40,000 listed firms in 26 developed
COVID-19
and emerging economies during the COVID-19 pandemic, document that a 10% decrease in
revenue entails a decrease of only 6% in operating expenses. This means profit is more
severely affected.
Second, as sales go down, firms suffer from liquidity problems as they do not have 353
enough cash to cover debt repayment and to service operating costs. Banerjee et al. (2020)
estimate that these vulnerable firms account for around 50% of all surveyed firms. Didier
et al. (2020) also find that not all firms in the US can survive if the lockdown period persists
as their working capital has almost run out. For example, firms in the retailing and
restaurant sectors can only survive for less than 30 days with their cash-on-hand. Other
firms in the consumer staples, textile, apparel and luxury goods, auto and components,
transport and utilities can continue operating for less than 60 days. At the same time, firms
have little chance to access external sources of credit since banks are reluctant to offer
credit lines to stressed firms, whilst trade partners may also be in trouble and unable to
provide trade credit.
Third, according to a report by the organization for economic co-operation and
development (OECD) (accessed in 2020), the pandemic has caused a large number of job losses
that cannot be reversed in the short run. It also has a detrimental effect on both national and
international supply chains. Altogether, these further drives demand downwards and
possibly lead to a global economic recession. Therefore, the chance for firms to quickly
recover after an extended lookdown period is minimal. According to a simulation performed
by De Vito and Gomez (2020) on listed firms in 35 OECD countries, if sales drop by 50%
(70%), the average firm would use up its capital in three (two) years. Thus, a slow recovery of
firms after the pandemic can possibly lead to the firms’ facing future liquidity problems.

2.4 The financial situation of Vietnamese firms during COVID-19 pandemic

Vietnam reported the first case of COVID-19 on 23 January 2020. Since then, the Vietnamese
Government has imposed a series of strict measures to combat the disease. As early as 6
March 2020, the government declared a period of school closure, which is extended on a
weekly basis. This caused a burden on parents who had to take leave or work from home to
take care of their children. At the same time, the government imposed several restrictions on
foreign entry, including a temporary suspension of visa issuance to all foreigners starting
from March 18, a temporary suspension of entry to all foreigners starting from March 22 and
an obligated 14-day quarantine for all people from overseas from March 21. The most
effective measure of the Vietnamese government to combat the spread of the COVID-19
pandemic, however, is to quickly identify and isolate all F1 and F2 cases related to an F0
patient. And from 1 April, Vietnam imposed a “nationwide social distancing” that lasted for
15 days in which the whole country went into self-isolation.
Thanks to the strict measures imposed by the government, Vietnam was able to have a
period of 99 days having no new infected case in the public until 26 July, when a new case was
reported in Da Nang city. However, Vietnamese firms have suffered heavily from the sudden
decline in consumer demand. According to the General Statistics Office of Vietnam (GSO,
2020b), the GDP of the whole country during the first half of 2020 increased by only 1.81%,
the lowest increase of the same period since 2011. Revenue from consumer retailing and
services reduced by 2,381bn VND (US$107m), a decline of 5.3% (after accounting for price
effect) compared to the same period last year. Of which, the revenue of tourism and hotel and
restaurant sectors witnessed the biggest fall (a decrease of 68.2% and 14%, respectively). The
CFRI number of new businesses decreased by 7.3%, and businesses that temporarily cease
11,3 operating increased by 38.3%. Unfortunately, Vietnam has several disadvantages which can
slow down the recovery process after a crisis, including skilled labour shortages, rigidities of
labour market, poor industrial relations (Manning, 2010), and a small and open economy with
a fixed exchange rate regime (Pincus, 2009).
Following a sudden decline in revenue, Vietnamese firms faced a serious liquidity problem
of being unable to repay debt and pay employees’ salaries. According to tapchitaichinh.vn
354 (accessed in 2020), for the first two-quarters of 2020, banks in Vietnam reported an increase of
bad debts by 11–29%. Vietcombank, the largest bank of Vietnam, witnessed an increase of
bad debts from 0.79 to 0.83% and increased bad debt reserve by 57% compared to the
beginning of the year. A survey by the GSO in April 2020 documented that, due to the impact
of the pandemic, 66.8% of Vietnamese firms had to reduce salary expenses, of which 39.5% of
firms let their employees take turn to work, 28.4% laid off their employees, 21.3% imposed
unpaid leave and 18.9% had salary cut (GSO, 2020a). The liquidity problem of Vietnamese
firms is more severe given the fact that firms rely heavily on short-term financing sources
(Nguyen et al., 2014). Altogether, these suggest a lack of financial stability amongst
Vietnamese firms.

3. Data and methodology

This study utilizes a sample of 279 listed firms in two exchanges: HOSE and HNX. The firms
are selected based on the availability of annual reports and financial information. We first
collect audited annual reports of Vietnamese listed firms for the year 2019, available on
https://finance.vietstock.vn/ and the firms’ websites. We then collect quarterly financial data
of firms from the S&P Global database. Missing financial data is supplemented by the data
collected from the firms’ quarterly financial statements downloaded from the firms’ websites.
Regarding our dependent variable, World Bank supports the approach of the Merton
model (Merton, 1974) to measure firm-level financial stability as the ability to meet all
financial obligations and estimate the default possibility. According to this approach, a firm’s
default risk (a.k.a. credit risk) is measured by valuing its put option. Unfortunately, Vietnam
does not have a market for stock options. We, therefore, decide to use a set of financial ratios
to represent a firm’s ability to repay its obligations. First, we utilize Current ratio and Quick
ratio to measure a firm’s ability to repay short-term obligations. Second, we employ Debt ratio
to proxy for a firm’s ability to repay its debt. Third, we use Cash-Total assets ratio to measure
a firm’s cash holding that can hedge for a sudden liquidity need. Fourth, we also utilize Asset
turnover, Account payables (AP) turnover, AR turnover and Inventory turnover to represent a
firm’s operating efficiency. Finally, we employ Net profit margin, return on assets (ROA) and
return of equity (ROE) to measure a firm’s ability to generate profit and/or operate normally
during a crisis period. A detailed definition of each financial ratio is reported in Table 1.
To account for firms’ risk management prior to the COVID-19 pandemic, we manually
collect risk management information from firms’ audited annual reports for the year 2019. We
employ Risk awareness, a dummy variable that equals one if the firm discloses and analyses
their risk in the 2019 annual report. This variable shows whether a firm has awareness of risk
prior to the COVID-19 pandemic or not. We also utilize Financial risk awareness and Special
risk awareness, dummies variable that equals one if the firm discloses and analyses their
financial risk and special risk in the 2019 annual report. Financial risk includes credit risk,
interest rate risk, foreign exchange risk, price risk and special risk includes natural disasters,
diseases, fire and other force majeure events. These two variables represent a firm’s
awareness of financial and special risk before the outbreak of COVID-19. Finally, we employ
Risk management tool, a dummy variable that equals one if the firm discloses their specific
risk management tool(s) in the 2019 annual report. We also collect information about which
Variable Unit Definition
Financial
stability during
Risk awareness measures COVID-19
Risk awareness (Awareness) NA A dummy variable that equals one if the firm discloses and analyzes
their risk in the 2019 annual report
Risk management tool (Tool) NA A dummy variable that equals one if the firm disclose their specific
risk management tool(s) in the 2019 annual report
Financial risk awareness (Fin NA A dummy variable that equals one if the firm discloses and analyzes 355
awareness) their financial risk in the 2019 annual report
Special risk awareness (Spec NA A dummy variable that equals one if the firm discloses and analyzes
awareness) their special risk, including disease, in the 2019 annual report
Financial ratios
Asset turnover NA Equals Net sales over Total assets
AP turnover NA Equals Total supply purchases over Account payables
AR turnover NA Equals Net sales over Account receivables
Inventory turnover NA Equals Cost of good sold over Inventories
Current ratio NA Equals Current assets over Current liabilities
Quick ratio NA Equals Current assets net Inventories, over Current liabilities
Debt ratio NA Equals Total debt over Total equity
Cash/total assets % Equals Cash over Total assets
Net profit margin % Equals Net income over Net sales
ROA % Equals Net income over Total assets Table 1.
ROE % Equals Net income over Total equity Variable definition

method(s) that a firm uses to hedge their risk to evaluate the effectiveness of each method in
risk management.
To examine the relationship between risk management and financial stability, we first
utilize univariate tests to compare the change in financial ratios, from before (Quarter 1 and 2/
2019) to during the COVID-19 Pandemic (Quarter 1 and 2/2020), between firms that have risk
awareness and those that do not have. We also perform a similar comparison between firms
that disclose their specific risk management tool(s) and those that do not. Amongst those
firms that disclose their risk management tool(s), we examine the change in financial ratios
for users of each tool to understand which tool is the most effective in ensuring financial
stability.
In addition, we also perform regression analyses to account for several factors that can
affect the financial ratios as well as the firm’s choice of risk management. Our regression
model is as followed:
Ratios ¼ β1 3 Awareness þ β2 3 Awareness 3 Crisis þ β3 3 Crisis þ β4 3 Firm size
þ Fixed effects

In this model, the dependent variables are the financial ratios of firms. The key independent
variables include Awareness, which represents firms’ risk awareness, utilization of risk
management tools, financial risk awareness and special risk awareness; Crisis, a dummy
variable that equals one during the COVID-19 pandemic and zero otherwise; and the
interaction of Awareness and Crisis. We also control for Firm size which is the natural
logarithm of firms’ total assets, firm fixed effects, industry fixed effects and quarter fixed
effects. However, the inclusion of firm fixed effects also means that Awareness is omitted from
our model as this variable remains unchanged for each firm during the studied period. In this
model, we focus on the coefficient of the interaction of Awareness and Crisis as it indicates
whether prior risk awareness can enhance the financial ratios of firms during the COVID-19
pandemic.
CFRI 4. Findings and discussions
11,3 4.1 Risk awareness and financial stability
We first provide summary statistics of the final sample in Table 2. Panel A of Table 2
summarizes the number of firms that have and do not have risk awareness prior to the
COVID-19 pandemic. Specifically, out of 279 firms, 243 have a section in their 2019 annual
report to discuss the firms’ risk; whilst 36 do not mention risk in their annual report. 141 firms
discuss their firms’ financial risk and 97 mention their special risk. Amongst those firms that
356 include risk discussion in their annual report, on 97 firms disclose the specific tools they
utilize to manage risk.
In Panel B of Table 2, we report the mean value for financial ratios in Quarters 1 and 2 of
2019, and Quarters 1 and 2 of 2020; then the same quarter difference between the two years.
This summary highlights the change in the financial ratios due to the effect of the COVID-19
pandemic. Overall, we find that the impact of the pandemic on firms’ financial situation is
more severe in Quarter 2 of 2020. Specifically, Asset turnover sees a significant decline in the
second quarter of 2020 compared to the same quarter in 2019 (a decline of 11.6%). AR
turnover also declines in Quarter 2, with the reduction of 26.4%. Another prominent change is
a drop in cash holding, with Cash/Total assets ratio decline by 11.8% [1]. Altogether, these
signal liquidity problems amongst firms. The results suggest that firms are unable to operate
efficiently to generate revenue while there are fixed costs that need to be paid. At the same

Panel A: summary statistics of risk awareness measures

Number of Y Number of N

Risk awareness 243 36

Risk management tool 76 203
Financial risk awareness 141 138
Special risk awareness 97 182

Panel B: Summary statistics of financial ratios

Variable Obs Q1- Q1- Q1/2020 - Q1/ Q2- Q2- Q2/2020-Q2/
2020 2019 2019 2020 2019 2019
Efficiency ratios
Asset turnover 279 0.272 0.257 0.015* 0.275 0.311 0.036***
AP turnover 279 4.753 5.036 0.283 4.483 4.452 0.031
AR turnover 279 2.130 2.331 0.201* 2.214 3.008 0.794***
Inventory 279 4.089 3.669 0.420 4.700 4.144 0.556
turnover
Liquidity ratios
Current ratio 279 2.646 2.529 0.117 2.257 2.265 0.008
Quick ratio 279 2.023 1.854 0.169 1.672 1.670 0.002
Debt ratio 279 1.087 1.132 0.045 1.207 1.235 0.028
Cash/total assets 279 6.877 7.773 0.084* 6.649 7.535 0.886**
Profitability ratios
Net profit margin 279 4.143 6.473 2.330 7.189 9.307 2.118
ROA 279 6.099 6.733 0.634 6.446 7.002 0.556
ROE 279 12.187 12.434 0.247 16.233 15.364 0.869
Note(s): This table provides the summary statistics of all variables used in the study. Panel A documents the
number of firms having (Y) or not having (N) awareness for risk in their 2019 Annual Reports. Panel B reports
the mean value of each financial ratio across all firms in the sample in Q1-2020, Q1-2019, Q2-2020 and Q2-2019,
Table 2. respectively. Same-quater differences are also provided in Panel B. Table 1 provides a detailed description of
Summary statistics the variables. *, ** and *** represent significance levels of 10, 5 and 1%, respectively, for the two-tailed T-test
time, firms also have difficulties in collecting receivables as their customers also face liquidity Financial
constraints. As a result, firms resort to cash reserve as their source of liquidity, leading to a stability during
decline in Cash/Total assets ratio.
It is worth noting that in Quarter 1/2020 we document no change that is significant at a 5%
COVID-19
level using a two tail T-test. This means the pandemic has no severe impact on firms’ financial
situation during the first three months of the year. This perfectly fits the pandemic timeline in
Vietnam, in which the government only imposed “social distancing”, the most rigorous
measure to combat the outbreak of the COVID-19 pandemic, from 1 April 2020. This policy 357
has a serious impact on all businesses in Vietnam as it freezes the whole economy and
triggers a substantial drop in gross demand (GSO, 2020b).
We next analyse the benefit of risk awareness on firm-level financial stability and report
the results of our univariate tests in Table 3. First, on the left-hand side of Table 3, we report
the change in the financial ratios of firms that do and do not have a section to discuss their
firms’ risk. We document that firms that have risk awareness see a significant decline in their
Asset turnover, AR turnover, Cash/Total assets and Net profit margin. These results are
similar to the results reported in Panel B of Table 2 when we analyse the impact of the
pandemic on the financial situation of all firms in our sample. This is reasonable since firms
having prior risk awareness account for 87% of our sample.
Second, on the right-hand side of Table 3, we report the change in the financial ratios of
firms who do and do not disclose their risk management tool(s) in their 2019 annual reports.
The results show that both groups of firms have a decline in Asset turnover and AR turnover

Risk awareness Risk management tool

Financial Q1/2020 - Q1/2019 Q2/2020-Q2/2019 Q1/2020 - Q1/2019 Q2/2020-Q2/2019
ratios Y N Y N Y N Y N

Efficiency ratios
Asset 0.015 0.015 0.038*** 0.027 0.023 0.012 0.054*** 0.030***
turnover
AP turnover 0.147 1.214 0.032 0.463 0.177 0.457 0.269 0.143
AR turnover 0.191* 0.265 0.809*** 0.689 0.201 0.201 0.679*** 0.837***
Inventory 0.349 0.883 0.635 0.042 0.191 0.500 0.733** 1.009**
turnover
Liquidity ratios
Current ratio 0.173 0.259 0.092 0.004 0.405* 0.009 0.130** 0.060
Quick ratio 0.202* 0.046 0.013 0.065 0.451** 0.065 0.084* 0.028
Debt ratio 0.056 0.033 0.031 0.001 0.129** 0.014 0.052 0.019
Cash/Total 0.762* 1.446 0.976** 0.287 0.136 1.218** 0.353 1.084**
assets
Profitability ratios
Net profit 1.950 4.831 3.348** 5.984* 0.156 3.271 4.839** 1.087
margin
ROA 0.575 1.112 0.557 0.543 0.008 0.893 0.862 0.436
ROE 0.085 1.515 0.550 3.359 1.741 0.350 1.293 1.718
Note(s): This table provides univariate test results for the difference in the change of financial ratios between
firms that have risk awareness/risk management tool and those that do not have. For each type of risk
awareness measure, the first column shows the change in the financial ratios of firms that have risk awareness
between Q1/2020 and Q1/2019, whilst the second column reports the corresponding change of firms that do not Table 3.
have risk awareness. The third and fourth columns show the change between Q2/2020 and Q2/2019. Table 1 Risk awareness and
provides a detailed description of the variables. *, ** and *** represent significance levels of 10, 5 and 1%, financial stability –
respectively, for the two-tailed T-test univariate tests
CFRI in Quarter 2 of 2020. However, firms that disclose their risk management tool(s) witness a
11,3 reduction in Inventory turnover by 0.733 times, whilst the other firms see an increase in this
ratio by 1.009 times. We also document significant differences in the liquidity situation of
these two groups. For firms that disclose their specific risk management tool(s), current ratio
and quick ratio have a significant improvement in 2020 compared to 2019; an increase of 5.7%
in Current ratio in Quarter 2/2020 and an increase of 24.3% in Quick ratio in Quarter 1/2020
[2]. In contrast, firms that do not disclose this information see no such improvement. At the
358 same time, we document a decline of 11.4% in Debt ratio of firms having risk management
tool(s) in Quarter 1 of 2020 [3]. This suggests this group of firms proactively reduce financial
leverage in response to the revolving COVID-19 pandemic.
In addition, we document that firms having no disclosure of risk management tool(s) have
a significant decline in cash holding in both Quarters 1 and 2 of 2020, the decline of 15.7 and
14.4% in Quarters 1 and 2, respectively [4]. This reduction, however, is not reported for firms
disclosing risk management tool(s). Overall, these results imply that the financial stability of
firms having risk management tool(s) is strengthened amidst the COVID-19 pandemic,
whereas the other firms face liquidity problems.
Regarding profitability ratios, the results show a significant decline of 52% in Net profit
margin of firms having risk management tool(s) in Quarter 2/2020 compared to Quarter 2/
2019 [5]. This reduction in profitability can be viewed as a trade-off between profitability and
liquidity. The firms may scarify their profitability to ensure financial stability.
To confirm our findings from the univariate tests in Table 3, we perform regression
analyses in Table 4. Panel A of Table 4 reports the results where the dependent variables
are efficiency ratios. Columns (1) to (4) of Panel A show the impact of risk awareness on the
efficiency ratios, whilst Columns (5) to (8) report the impact of the utilization of risk
management tools (as disclosed in the annual reports) on the ratios. In each regression,
we focus on the coefficient of the interaction between Awareness and Crisis and between
Tool and Crisis. We find that only the coefficient of the interaction term in Column (8) is
negative and significant at a 10% level, which means firms that disclose their risk
management tools in the 2019 annual reports can lower their inventory turnover during the
crisis period compared to the other firms. This is consistent with our univariate test results
in Table 3.
In Panel B, we document the regression results with the dependent variables being
liquidity ratios. First, we find that the coefficient of the interaction term in Regression (3) is
negative and significant at a 1% level. This suggests that firms that express their risk
awareness in the 2019 annual reports tend to have their Debt ratio lowered during the crisis
period. This is the new finding that is not disclosed in our univariate tests. Second, we
document that the coefficients of the interaction term in Regressions (5), (6), (8) are all positive
and statistically significant. These results confirm our prior findings that firms having
disclosed their risk management tools see an improvement in their liquidity ratios (i.e.
Current ratio, Quick ratio and Cash/Total assets ratios).
Finally, Panel C of Table 4 shows the results where the dependent variables are
profitability ratios. We document that the coefficients of the interaction term in Regression (4)
and (6) are negative and significant at a 10% level. These results align with our univariate
tests and suggest that firms that disclose their risk management tools in the 2019 annual
reports tend to see a decline in profitability during the crisis period.
Overall, we find that the results of our univariate tests and regression analyses in Tables 3
and 4 are consistent. Both results suggest ex-ante risk awareness (measured by the disclosure
of risk in annual report) do not necessarily ensure the financial stability of firms during an
economic shock driven by the COVID-19 pandemic. However, we find that if firms disclose
their risk management tool(s), they can utilize their asset more efficiently and have a better
financial liquidity situation than those that do not disclose. But the former group of firms
Panel A: regression results of the relationship between risk awareness and efficiency ratios
(1) (2) (3) (4) (5) (6) (7) (8)
Variables Asset turnover AP turnover AR turnover Inventory turnover Variables Asset turnover AP turnover AR turnover Inventory turnover

Crisis 3 awareness 0.0070 (0.0172) 0.0195 (0.5735) 0.0289 (0.2213) 0.0459 (0.2159) Crisis 3 tool 0.0012 (0.0117) 0.0258 (0.4411) 0.1025 (0.1286) 0.2915* (0.1666)
Crisis 0.0276* (0.0165) 0.0024 (0.5449) 0.2305 (0.2129) 0.0244 (0.2064) Crisis 0.0211*** (0.0079) 0.0269 (0.2708) 0.2850*** (0.1068) 0.1443 (0.1252)
Firm size 0.0915*** (0.0339) 1.5249* (0.8384) 0.5382* (0.2982) 0.3567 (0.4499) Firm size 0.0916*** (0.0340) 1.5229* (0.8407) 0.5450* (0.2985) 0.3356 (0.4514)
Observations 1,457 1,457 1,457 1,457 1,457 1,457 1,457 1,457
R-squared 0.8331 0.7329 0.8161 0.8898 0.8331 0.7329 0.8161 0.8900
Robust Yes Yes Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes Yes Yes
Quarter FE Yes Yes Yes Yes Yes Yes Yes Yes

Panel B: regression results of the relationship between risk awareness and liquidity ratios
Variables (1) (2) (3) (4) Variables (5) (6) (7) (8)
Current ratio Quick ratio Debt ratio Cash/total assets Current ratio Quick ratio Debt ratio Cash/total assets
Crisis 3 awareness 0.1444 (0.1494) 0.0960 (0.1210) 0.0722*** (0.0277) 0.4341 (0.6498) Crisis 3 tool 0.2116** (0.0998) 0.1786* (0.0930) 0.0292 (0.0271) 0.9971** (0.4442)
Crisis 0.0922 (0.1434) 0.0213 (0.1135) 0.0230 (0.0269) 0.9316 (0.6245) Crisis 0.0260 (0.0768) 0.0119 (0.0692) 0.0781*** (0.0182) 0.8350*** (0.3184)
Firm size 1.8396*** (0.3575) 1.4477*** (0.2963) 1.3936*** (0.0847) 2.0171** (0.9275) Firm size 1.8496*** (0.3548) 1.4565*** (0.2950) 1.3942*** (0.0841) 2.0690** (0.9314)
Observations 1,457 1,457 1,457 1,457 1,457 1,457 1,457 1,457
R-squared 0.8663 0.8773 0.9572 0.7745 0.8666 0.8776 0.9572 0.7752
Robust Yes Yes Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes Yes Yes
Quarter FE Yes Yes Yes Yes Yes Yes Yes Yes

Panel C: regression results of the relationship between risk awareness and profitability ratios
(1) (2) (3) (4) (5) (6)
Variables Net profit margin ROA ROE Variables Net profit margin ROA ROE

Crisis 3 awareness 0.4734 (1.5619) 0.4285 (0.8081) 0.4856 (1.8214) Crisis 3 tool 1.5524* (0.8503) 0.2397 (0.5907) 2.0133* (1.1856)
Crisis 0.7342 (1.5289) 1.4309* (0.7712) 1.7843 (1.7438) Crisis 0.7038 (0.5650) 0.9861*** (0.3662) 0.7836 (0.7576)
Firm size 3.5318** (1.6706) 4.7509*** (1.3624) 13.2541*** (3.7211) Firm size 3.6217** (1.6567) 4.7716*** (1.3655) 13.3589*** (3.7059)
Observations 1,457 1,457 1,457 1,457 1,457 1,457
R-squared 0.7449 0.5572 0.5449 0.7455 0.5572 0.5458
Robust Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes
Quarter FE Yes Yes Yes Yes Yes Yes
Note(s): This table provides regression results for the relationship between risk awareness/the utilization of rik management tools and firms’ financial ratios from
Quarter 1/2019 to Quarter 2/2020. Panel A reports the results where the dependent variables are efficiency ratios. Panel B documents the results with the dependent
variables being liquidity ratios. And Panel C shows the results where the dependent variables are profitability ratios. Column (1) to (4) of Panel A and B and Column (1) to
(3) of Panel C show the impact of risk awareness on the ratios, whilst Column (5) to (8) of Panel A and B and Column (4) to (6) of Panel C show the impact of the utilization of
risk management tools on the ratios. Table 1 provides a detailed description of the variables. *, ** and *** represent significance levels of 10, 5 and 1%, respectively, for the
two-tailed T-test
COVID-19

359
stability during

Risk awareness and

financial stability –
Table 4.
Financial

Regression results
CFRI have a lower net profit margin during the pandemic crisis. This means firms having risk
11,3 management tool(s) scarify their profitability to ensure financial stability.
In Table 5, we examine whether firms that discuss their financial/special risk in their 2019
annual reports are less affected by the COVID-19 pandemic than those having no such
discussion. First, we document that in Quarter 2/2020, firms that do not disclose their
financial risk have a significant increase in Inventory turnover. However, Cash/Total assets
and Net profit margin have significant decrease. These changes, however, are not
360 documented for firms mentioning financial risk in their annual reports. Second, we find
that firms disclosing their special risk have a larger decline in AR turnover compared to those
that do not disclose. These firms also have a significant decline in Net profit margin and ROA
in Quarter 2/2020. However, we find that firms that do not disclose special risk have a
significant decline in Cash/Total assets ratio. Overall, the results in Table 5 are mixed in the
sense that we cannot conclude on the relationship between disclosure of financial/special risk
in the annual report and financial stability.
In Table 6, we provide regression results to confirm our findings in Table 5. In Panel A, we
focus on the impact of financial risk awareness and special risk awareness on the efficiency
ratios of firms. We document that the coefficient of the interaction term in Regression (7) is
negative and significant at a 5% level. This means firms having ex-ante awareness for special
risk can reduce their account receivable during the crisis period compared to the remaining
firms. In Panel B where the focus is on liquidity ratios, we document that the coefficients of the
interaction term in Regressions (1), (2) and (8) are positive and statistically significant. This
indicates that firms with prior awareness for financial risk tend to have better Current ratio
and Quick ratio during the pandemic crisis, whereas firms showing awareness for special risk
see a higher Cash/Total assets ratio than the other firms. Finally, in Panel C where we focus on
profitability ratios, none of the interaction terms are significant.
Altogether, while the results in Table 5 are mixed regarding the role of financial/special
risk awareness in ensuring firms’ financial stability, the regression results in Table 6 confirm
that prior awareness of financial and special risk is effective in enhancing the efficiency and
liquidity of firms during the COVID-19 pandemic.

4.2 Robustness checks

One concern with our difference-in-differences setting is the potential endogeneity issue that
arises from the fact that firms with prior risk awareness (treatment sample) can be
fundamentally different from the other firms (control sample). In the attempt to rule out this
concern, we perform entropy balancing to balance our treatment and control samples using
all the financial ratios [6] in the quarter immediately before the outbreak of the COVID-19
pandemic in Vietnam (i.e. Quarter 4 of 2019). This process generates a weighted control
sample that is well-balanced with the treatment sample whilst avoiding loss of observations
(Hainmueller, 2012). The regression results utilizing the balanced data are reported in Table 7.
For the sake of clarity, we only report regressions of which the coefficients of the interaction
terms are statistically significant. Panel A of Table 7 documents the results examining the
relationship between risk awareness and financial ratios, whilst Panel B shows results
examining the relationship between financial/special risk awareness and financial ratios. We
find that most of our results still hold with only one exception (i.e. the impact of risk
management tool(s) on Quick ratio). Thus, we conclude that our main findings are not biased
by the difference between the treatment and control samples.
To establish the validity of our difference-in-differences model, we also perform parallel
trend analyses by hypothetically shifting the outbreak of the COVID-19 pandemic in Vietnam
ahead by two-quarters [7] (i.e. starting from Quarter 3 of 2019). We then rerun our regressions
using the data of the year 2019 alone, with Quarters 1 and 2 of 2019 being the hypothetical
 Financial risk awareness Special risk awareness
Q1/2020-Q1/2019 Q2/2020-Q2/2019 Q1/2020-Q1/2019 Q2/2020-Q2/2019
Financial ratios Y N Y N Y N Y N

Efficiency ratios
Asset turnover 0.016* 0.014 0.045*** 0.029** 0.019 0.013 0.031*** 0.040***
AP turnover 0.266 0.848* 0.019 0.083 0.194 0.330 0.063 0.080
AR turnover 0.119 0.284 0.838*** 0.748*** 0.396** 0.099 1.092*** 0.635***
Inventory turnover 0.392 0.449 0.002 1.118** 0.378 0.442 0.286 0.698
Liquidity ratios
Current ratio 0.155 0.077 0.003 0.021 0.275 0.032 0.122 0.051
Quick ratio 0.242 0.096 0.015 0.011 0.262 0.121 0.064 0.037
Debt ratio 0.027 0.063* 0.003 0.052 0.056 0.039 0.016 0.051
Cash/total assets 0.675 1.031* 0.437 1.345*** 0.291 1.457*** 0.896 0.881**
Profitability ratios
Net profit margin 2.250 6.943*** 2.251 1.984 1.571 2.735 7.205** 0.597
ROA 0.258 1.073 0.913 0.178 0.152 0.880 2.272** 0.279
*
ROE 0.915 0.469 0.463 2.227 1.155 0.228 1.003 1.838
Note(s): This table provides univariate test results for the difference in the change of financial ratios between firms that have financial risk awareness/special risk
awareness and those that do not have. For each type of risk awareness measure, the first column shows the change in the financial ratios of firms that have risk awareness
between Q1/2020 and Q1/2019, whilst the second column reports the corresponding change for firms that do not have risk awareness. The third and fourth columns show
the change between Q2/2020 and Q2/2019. Table 1 provides a detailed description of the variables. *, ** and *** represent significance levels of 10, 5 and 1%, respectively,
for the two-tailed T-test
COVID-19

361
stability during

univariate tests
risk awareness and
financial stability –
Table 5.
Financial

Financial and special

 11,3

362
CFRI

Table 6.

regression results
financial stability –
risk awareness and
Financial and special
Panel A: regression results of the relationship between financial and special risk awareness and efficiency ratios
(1) (2) (3) (4) (5) (6) (7) (8)
Inventory Inventory
Variables Asset turnover AP turnover AR turnover turnover Variables Asset turnover AP turnover AR turnover turnover

Crisis 3 FinAwareness 0.0015 (0.0114) 0.3088 (0.4014) 0.0658 (0.1472) 0.1915 (0.1704) Crisis 3 SpecAwareness 0.0053 (0.0130) 0.4100 (0.3962) 0.3254** (0.1639) 0.2313 (0.1861)
Crisis 0.0207** (0.0098) 0.1380 (0.3178) 0.2892** (0.1190) 0.1616 (0.1321) Crisis 0.0233*** (0.0074) 0.1626 (0.2942) 0.1420 (0.0926) 0.1457 (0.1193)
Firm size 0.0918*** (0.0340) 1.5761* (0.8417) 0.5499* (0.3019) 0.3236 (0.4491) Firm size 0.0908*** (0.0339) 1.4650* (0.8495) 0.4904 (0.2983) 0.3190 (0.4533)
Observations 1,457 1,457 1,457 1,457 1,457 1,457 1,457 1,457
R-squared 0.8331 0.7331 0.8161 0.8899 0.8331 0.7331 0.8167 0.8900
Robust Yes Yes Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes Yes Yes
Quarter FE Yes Yes Yes Yes Yes Yes Yes Yes

Panel B: regression results of the relationship between financial and special risk awareness and liquidity ratios
Variables (1) (2) (3) (4) Variables (5) (6) (7) (8)
Current ratio Quick ratio Debt ratio Cash/total assets Current ratio Quick ratio Debt ratio Cash/total assets
* * **
Crisis 3 FinAwareness 0.1855 (0.1033) 0.1733 (0.0952) 0.0272 (0.0242) 0.7010 (0.4422) Crisis 3 SpecAwareness 0.0593 (0.1137) 0.0724 (0.1079) 0.0262 (0.0280) 1.0225 (0.4896)
Crisis 0.0597 (0.0839) 0.0251 (0.0746) 0.0726*** (0.0179) 0.9069** (0.3669) Crisis 0.0138 (0.0720) 0.0377 (0.0622) 0.0773*** (0.0174) 0.9086*** (0.2841)
Firm size 1.8684*** (0.3552) 1.4752*** (0.2956) 1.3971*** (0.0846) 2.1287** (0.9337) Firm size 1.8460*** (0.3557) 1.4568*** (0.2945) 1.3963*** (0.0857) 2.1591** (0.9167)
Observations 1,457 1,457 1,457 1,457 1,457 1,457 1,457 1,457
R-squared 0.8666 0.8777 0.9572 0.7749 0.8662 0.8773 0.9572 0.7754
Robust Yes Yes Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes Yes Yes
Quarter FE Yes Yes Yes Yes Yes Yes Yes Yes

Panel C: regression results of the relationship between financial and special risk awareness and profitability ratios
(1) (2) (3) (4) (5) (6)
Variables Net profit margin ROA ROE Variables Net profit margin ROA ROE

Crisis 3 FinAwareness 0.1276 (0.8231) 0.2769 (0.5402) 1.0657 (1.1058) Crisis 3 SpecAwareness 1.1257 (0.8332) 0.2460 (0.5943) 1.2047 (1.1706)
Crisis 1.0844 (0.6974) 1.1954*** (0.4206) 0.8154 (0.9061) Crisis 0.7539 (0.5912) 0.9683*** (0.3563) 0.9329 (0.7757)
** *** *** ** ***
Firm size 3.5458 (1.6660) 4.7108 (1.3748) 13.4326 (3.7068) Firm size 3.6900 (1.6716) 4.7932 (1.3714) 13.4354*** (3.7205)
Observations 1,457 1,457 1,457 1,457 1,457 1,457
R-squared 0.7449 0.5572 0.5452 0.7452 0.5572 0.5453
Robust Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes
Quarter FE Yes Yes Yes Yes Yes Yes
Note(s): This table provides regression results for the relationship between financial risk awareness/special risk awareness and firms’ financial ratios from Quarter 1/2019 to Quarter 2/2020. Panel A reports the results where the
dependent variables are efficiency ratios. Panel B documents the results with the dependent variables being liquidity ratios. And Panel C shows the results where the dependent variables are profitability ratios. Column (1) to (4)
of Panel A and B and Column (1) to (3) of Panel C show the impact of financial risk awareness on the ratios, whilst Column (5) to (8) of Panel A and B and Column (4) to (6) of Panel C show the impact of special risk awareness on the
ratios. Table 1 provides a detailed description of the variables. *, ** and *** represent significance levels of 10, 5 and 1%, respectively, for the two-tailed T-test
Panel A: regression results utilizing entropy balancing of the relationship between risk awareness and financial ratios
(1) (2) (3) (4) (5) (6)
Variables Debt ratio_w Variables Inventory turnover_w Current ratio_w Cash/total assets_w Net profit margin_w ROE_w

Crisis 3 awareness 0.0675** (0.0266) Crisis 3 tool 0.3936** (0.1772) 0.1782* (0.0922) 0.7632* (0.4634) 1.4060* (0.8436) 2.3215* (1.2279)
Crisis 0.0246 (0.0256) Crisis 0.1800 (0.1447) 0.0026 (0.0641) 0.5560 (0.3554) 0.6808 (0.5676) 0.4156 (0.8185)
Firm size_w 1.3212*** (0.0785) Firm size_w 0.6329 (0.4229) 1.9079*** (0.3118) 1.6303 (1.4774) 3.8927* (2.1753) 15.6625*** (3.9425)
Observations 1,457 1,457 1,457 1,457 1,457 1,457
R-squared 0.9573 0.8675 0.8395 0.7547 0.6953 0.5948
Robust Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes
Quarter FE Yes Yes Yes Yes Yes Yes

Panel B: regression results utilizing entropy balancing of the relationship between financial and special risk awareness and financial ratios
Variables (1) (2) Variables (3) (4)
Current ratio_w Quick ratio_w AR turnover_w Cash/total assets_w
Crisis 3 FinAwareness 0.1886*** (0.0663) 0.1623*** (0.0534) Crisis 3 SpecAwareness 0.4546*** (0.1578) 0.8978* (0.5167)
Crisis 0.0788 (0.0559) 0.0400 (0.0447) Crisis 0.0553 (0.0793) 0.7724** (0.3117)
Firm size_w 1.1862*** (0.3092) 1.0358*** (0.2072) Firm size_w 0.2483 (0.2063) 2.7114** (1.2531)
Observations 1,457 1,457 1,457 1,457
R-squared 0.9111 0.8785 0.8681 0.7722
Robust Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes
Quarter FE Yes Yes Yes Yes
Note(s): This table provides regression results utilizing entropy balancing for the relationship between risk awareness, financial, special risk awareness and firms’
financial ratios from Quarter 1/2019 to Quarter 2/2020. Panel A reports the results when we examine firms’ risk awareness. Panel B documents the results examining firms’
financial and special risk awareness. Table 1 provides a detailed description of the variables. *, ** and *** represent significance levels of 10, 5 and 1%, respectively, for the
two-tailed T-test
COVID-19

363
stability during

awareness and
financial, special risk

financial stability –
Financial

Risk awareness,
Table 7.

balancing
utilizing entropy
Regression results
CFRI non-crisis period and Quarters 3 and 4 being the hypothetical crisis period. The regression
11,3 results, reported in Table A1, show that almost all significant results disappear. This further
confirms the validity of our model.

4.3 Subsample analyses on the relationship of risk awareness and financial stability
In this section, we provide subsample analyses to examine the relationship between prior risk
364 awareness and financial stability across firms with different characteristics. The results are
reported in Table 8, and for the sake of clarity, we only report regressions of which the
coefficients of the interaction terms are statistically significant. First, in Panel A, we split our
sample into two subsamples of small and large firms by the median value of the firms’ total
assets. We find that prior risk awareness, in fact, leads to higher AP turnover for smaller
firms, although it helps reduce debt ratio and enhance cash ratio for those firms during the
economic turbulence. For larger firms, prior risk awareness results in lowered AP turnover,
lowered inventory turnover, and better current and quick ratios. These findings suggest that
risk awareness shows positive impact on the financial situation of both small and large firms
during the crisis period. However, the degree of effect is not the same since it exerts impact on
a different set of financial ratios.
In Panel B, we examine two subsamples of low leveraged firms and highly leveraged firms,
split by the median value of the firms’ debt ratio. We find that, for firms with a low debt ratio,
the impact of prior risk awareness is significant on enhancing the firms’ cash ratio. However, it
also lowered the firms’ ROE during the crisis period. In contrast, for firms with high leverage,
ex-ante risk management exerts significant and favourable impact on several financial aspects
during the crisis period, including AP turnover, inventory turnover, debt ratio, current and
quick ratios. These findings are reasonable given that highly leveraged firms are more
financially risky. Thus, during the period of economic turbulence, the role of prior risk
management is more pronounced for those firms compared to firms with lower leverage.
Finally, in Panel C, we segregate our sample into a subsample of firms in less affected
industries (i.e. Pharmaceuticals, food and beverage, publishing, utilities, consulting,
agricultural products, household products) and another subsample of firms in more
affected industries (i.e. oil and gas, real estates, luxury goods, hospitality and restaurant,
logistics, transportation and retailing). The industry classification is adopted from the S&P
Global database. The results show that both subsamples of firms can benefit from prior risk
awareness. While less affected firms that have ex-ante risk management see an improvement
in their debt ratio, asset turnover, current and quick ratios; firms from the more affected
industries that have prior risk awareness witness an improvement in their AP turnover, debt
ratio and cash ratio during the crisis. However, for more affected firms who disclose their risk
management tool(s) in the 2019 annual reports, we also document a decline in net profit
margin during the pandemic period. It means those firms need to compensate their
profitability to ensure financial stability.

4.4 The effectiveness of risk management tool in ensuring financial stability

We next examine the tools that Vietnamese firms use to manage risk and their effectiveness
in ensuring firm-level financial stability during the COVID-19 pandemic. Table 9 presents the
summary of risk management tool(s) used by our sampled firms. By manually collect risk
management data from the firms’ 2019 annual report, we classify risk management tools into
nine categories, which are reported in Table 9 in the order of popularity declining. Debt
management is the most popular tool, which has 30 users accounting for 11% of our sample
and 39% of firms disclosing their risk management tool(s). The second popular method is
Receivables management, which has 28 users. Other methods, including Cash reserve, Cash
flow management, Customer evaluation, Insurance and Inventory management, have the
Panel A: the impact of ex-ante risk awareness on the financial stability of small firms versus large firms
Small firms Large firms
(1) (2) (3) (4) (5) (6) (7)
Variables AP turnover Debt ratio Cash/total assets AP turnover Inventory turnover Current ratio Quick ratio

Crisis 3 awareness 1.3898** (0.5820) 0.0945** (0.0400) 1.4764** (0.7370)

Crisis 3 tool 1.4505** (0.7348) 0.3922** (0.1843) 0.2148* (0.1095) 0.1773* (0.0970)
**
Crisis 1.1662 (0.5108) 0.0319 (0.0398) 1.2340** (0.5040) 1.3622** (0.6799) 0.0906 (0.1618) 0.0575 (0.0902) 0.0356 (0.0811)
Firm size 1.7901 (1.2456) 1.4922*** (0.1509) 1.9178 (1.5857) 4.3864** (1.8138) 1.9564* (1.1023) 2.0546*** (0.5537) 1.7526*** (0.5138)
Observations 734 747 747 746 740 746 746
R-squared 0.7484 0.9366 0.7654 0.7423 0.9181 0.8584 0.8762
Robust Yes Yes Yes Yes Yes Yes Yes
Firm/Industry/Quarter FE Yes Yes Yes Yes Yes Yes Yes

Panel B: the impact of ex-ante risk awareness on the financial stability of firms with low leverage versus firms with high leverage
Firms with low leverage Firms with high leverage
(1) (2) (3) (4) (5) (6) (7) (8)
Variables Cash/Total assets ROE AP turnover Quick ratio Debt ratio Inventory turnover Current ratio Quick ratio

Crisis 3 awareness 0.9981* (0.5359) 0.1288* (0.0724) 0.1210** (0.0488)

Crisis 3 tool 1.4564** (0.6613) 2.9631* (1.6155) 0.3606* (0.1987) 0.3230** (0.1587) 0.2868* (0.1545)
*
Crisis 1.2483** (0.5531) 3.1852*** (1.0544) 0.9211 (0.4892) 0.0922 (0.0614) 0.0056 (0.0456) 0.0758 (0.1458) 0.1101* (0.0621) 0.0604 (0.0552)
Firm size 5.2405* (3.1771) 24.4560*** (6.0517) 0.7391 (0.7407) 0.6779** (0.3113) 1.4434*** (0.1098) 0.0609 (0.3671) 0.7025** (0.3218) 0.7135** (0.3130)
Observations 739 735 720 724 724 703 724 724
R-squared 0.7752 0.6193 0.7632 0.7129 0.9462 0.8746 0.7257 0.7164
Robust Yes Yes Yes Yes Yes Yes Yes Yes
Firm/Industry/Quarter FE Yes Yes Yes Yes Yes Yes Yes Yes

Panel C: the impact of ex-ante risk awareness on the financial stability of firms in less affected industries versus firms in more affected industries
Firms in less affected industries Firms in more affected industries
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Variables Debt ratio Asset turnover Current ratio Quick ratio Debt ratio AP turnover Debt ratio Debt ratio Cash/Total assets Net profit margin

Crisis 3 awareness 0.0534* (0.0302) 1.3342* (0.7506) 0.0947* (0.0530)

Crisis 3 tool 0.0229* (0.0136) 0.2777* (0.1452) 0.2346* (0.1384) 0.0793** (0.0379) 0.0629** (0.0308) 2.0171** (0.8606) 3.0167** (1.5176)
Crisis 0.0424 (0.0282) 0.0084 (0.0111) 0.0435 (0.1121) 0.0581 (0.1050) 0.0644** (0.0264) 0.9698 (0.6923) 0.0043 (0.0538) 0.1034*** (0.0225) 1.5672*** (0.5157) 1.3665 (0.9277)
Firm size 1.2894*** (0.1133) 0.0679* (0.0365) 1.8537*** (0.4872) 1.6650*** (0.4267) 1.2938*** (0.1114) 1.0652 (1.5533) 1.5912*** (0.1057) 1.5949*** (0.1052) 0.7341 (1.6802) 6.4496** (3.2099)
Observations 900 900 899 899 900 592 599 599 599 592
R-squared 0.9368 0.8135 0.8185 0.8179 0.9371 0.7481 0.9813 0.9813 0.7360 0.7937
Robust Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Firm/industry/quarter FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Note(s): This table provides subsample analyses for the relationship between financial risk awareness/special risk awareness and firms’ financial ratios from Quarter 1/2019 to Quarter 2/2020. Panel A
reports the results for two subsamples of small firms and large firms, split by the median value of the firms’ total assets. Panel B documents the results for two subsamples of firms with low leverage and firms
with high leverage, split by the median value of the firms’ debt ratio. Panel C presents the results for firms in less affected industries (i.e. pharmaceuticals, food and beverage, publishing, utilities, consulting,
agricultural products, household products) and firms in more affected industries (i.e. oil and gas, real estates, luxury goods, hospitality and restaurant, logistics, transportation and retailing). Table 1 provides
a detailed description of the variables. *, ** and *** represent significance levels of 10, 5 and 1%, respectively, for the two-tailed T-test
COVID-19

365
stability during

risk awareness on
Subsample analyses on
Table 8.
Financial

stability
firms’ financial
the impact of ex-ante
CFRI Risk
11,3 management Number of
ID tool Methods users

1 Debt (1) Reduce or manage the use of debt 30

management (2) Find alternative sources of funding
(3) Debt restructure
366 (4) Prioritize payment of debt with high interest rate to reduce
interest expense
(5) Match asset and debt
2 Receivables (1) Establish receivables ageing schedule 28
management (2) Have reserve for receivables
3 Cash reserve (1) Reserve cash 20
(2) Reserve foreign currency
4 Cash flow (1) Match cash inflows and outflows 19
management (2) Improve cash conversion cycle
5 Customer (1) Check customer credibility 16
evaluation (2) Require deposit from customer
(3) Require bank guarantee
(4) Set limits for customer credit
6 Insurance (1) Asset insurance 13
7 Inventory (1) Manage inventory 11
management (2) Manage working capital
8 Cost (1) Minimize costs 7
management
9 Derivatives (1) Use derivatives for interest rates and/or raw materials 6
Note(s): This table summarizes the details of risk management tools used by firms in the studied sample. The
Table 9. first column shows tool IDs, which are also used in Table 6. The second and third columns document the names
Summary of risk of risk management tools and the specific methods used by the firms for each tool. The last column reports the
management tools number of firms using a particular risk management tool. Note that one firm can use more than one tool

number of users vary from 11 to 20. The two methods, including Cost management and
Derivatives, are the least popular risk management methods which have less than 10 users. It
is also worth noting that one firm can utilize more than one risk management tool(s).
In Table 10, we report the change in financial ratios of firms, classified by their tool(s) of
risk management. Tool IDs are in correspondence with the IDs in Table 9. For each financial
ratio, the first row shows the change in the ratio of firms between Q1/2020 and Q1/2019,
whilst the second row reports the change between Q2/2020 and Q2/2019. It is notable that
Debt management, the most popular tool, is also the most effective tool in ensuring the firm
financial stability. We document that firms employing Debt management have significantly
higher Current ratio, higher Quick ratio and lower Debt ratio during the pandemic period.
This suggests financial stability is enhanced for these firms. For other tools, we document
that Receivables management helps enhance Asset turnover but reduces Net profit margin;
and Derivatives employment allows firms to reduce Debt ratio during the pandemic period.
The remaining tools show no significant improvement effect on firm-level financial stability.
The last two columns of Table 10 report the significant level of the T-test for the difference
in the change of financial ratios between firms that use only one risk management tool and
those using more than one tools; and the ANOVA test for the difference in the change of
financial ratios amongst firms using different number of tools. The results of T-test show that
if firms use more than one tool to hedge for their risk, the effectiveness in managing Current
ratio and Quick ratio is lower compared to those using only one tool. At the same time,
ANOVA test results suggest that the number of risk management tools employed by firms
significantly can affect the tool’s effectiveness in managing most financial ratios.
 RM tool (1) (2) (3) (4) (5) (6) (7) (8) (9) T-test ANOVA

Efficiency ratios
* ***
Asset turnover 0.048 0.021 0.044 0.047 0.023 0.083** 0.027 0.024 0.054
***
0.006 0.040 0.067** 0.007 0.054 0.016 0.028 0.009 0.022
***
AP turnover 0.487 0.749 1.058 2.025 1.337 0.765 0.795 0.0528 0.668
***
0.014 0.771 0.751 0.893 1.020 0.256 0.578 0.518 0.541
*
AR turnover 0.029 0.011 0.512 0.052 0.356 0.173 0.232 0.325 0.563
***
0.719 0.651 0.337 0.794 0.851 0.406 0.239 0.904 0.065
***
Inventory turnover 0.363 0.234 1.230 0.101 0.720 0.869 0.060 1.167 1.211
***
0.353 0.095 0.331 0.251 0.437 0.483 0.685 0.002 0.145
Liquidity ratios
***
Current ratio 0.342 0.490 0.477 0.820 0.606 1.137* 0.220 0.735 0.855
** ***
0.266** 0.034 0.044 0.237 0.109 0.004 0.039 0.141 0.356
***
Quick ratio 0.311 0.454 0.514 0.758 0.574 1.103* 0.267 0.736 0.848
** ***
0.259*** 0.062 0.087 0.201* 0.086 0.101 0.091 0.040 0.294*
***
Debt ratio 0.256** 0.151 0.071 0.189 0.106 0.144 0.047 0.098 0.295
0.190*** 0.072 0.124 0.123 0.068 0.010 0.107 0.027 0.295**
***
Cash/total assets 0.048 0.119 0.151 0.225 2.401 0.773 0.553 1.379 0.856
*
0.397 0.114 0.533 0.751 0.532 0.272 0.512 0.421 0.684
Profitability ratios
***
Net profit margin 1.478 3.968 8.774*** 2.605 8.770*** 6.055 2.118 4.222 3.047
***
2.976 5.867 0.079 4.779 5.508 9.374* 4.924 2.264 3.177
***
ROA 0.889 0.177 0.216 1.108 0.924 3.392 1.661 4.012 2.205
**
0.093 0.066 1.863 0.565 0.856 2.694 0.155 2.184 2.451
**
ROE 1.220 3.965 0.183 0.196 5.503 3.410 1.403 5.344 4.605
*
3.721 3.070 2.931 0.259 1.933 6.254 3.489 9.173 0.249
Note(s): This table provides univariate test results for the difference in the change of financial ratios amongst firms that used different risk management tool. Tool IDs are
in correspondence with the IDs in Table 5. For each financial ratio, the first row shows the change in the ratio of firms between Q1/2020 and Q1/2019, whilst the second row
reports the change between Q2/2020 and Q2/2019. The last two columns report the significant level of the T-test for the difference in the change of financial ratios between
firms that use only one risk management tool and those using more than one tool; and the ANOVA test for the difference in the change of financial ratios amongst firms
using difference number of tools. Table 1 provides a detailed description of the variables. *, ** and *** represent significance levels of 10, 5 and 1%, respectively, for the two-
tailed T-test
COVID-19

367
stability during

management tools
Effectiveness of risk
Financial

Table 10.
CFRI 5. Conclusion
11,3 By analysing risk management and financial data of 279 Vietnamese listed firms, we find that
that, on average, the financial situation of firms is severely affected by the COVID-19
pandemic, and the impact is more detrimental in the second quarter of 2020. We also
document no clear evidence that ex-ante risk awareness, including the awareness of financial
and special risk, can help ensure the financial stability of firms during the pandemic period. In
contrast, we report that the financial stability of firms having risk management tool(s) is
368 strengthened amid the COVID-19 pandemic, whereas the other firms face liquidity problems.
But the former group of firms have to trade-off between profitability and liquidity.
We also classify risk management tools employed by the sampled firms into nine
categories and find that Debt management and Receivables management are not only the two
most popular but also the most effective tools that Vietnamese firms use for risk hedging.
Our study has both theoretical and practical contributions. First, we add to the literature
on risk management by analysing the effectiveness of prior risk awareness and risk
management in ensuring the financial stability of firms when an economic shock suddenly
occurs. This research topic opens a direction for future study on the importance of risk
awareness and risk management in the sustainable growth of firms, particularly during
periods of unfavourable economic conditions.
Second, our study has highly practical value for managers who are considering a hedging
method for their firms. Specifically, we show that risk awareness is not as important as
having risk management tools; and that debt management, account receivables management
and derivatives are the three effective methods of risk management that Vietnamese firms
should consider employing. On the one hand, our conclusion can be generalized for firms from
similar economies. On the other hand, our research framework can also be utilized by
researchers worldwide to perform similar study on different samples.
Our study, however, has a few limitations that allow room for future research. Our first
limitation is the existence of endogeneity problems as the ex-ante risk management behaviours
are endogenously and optimally chosen by firms. By structuring our regression model as a
difference-in-differences regression, control for several factors that can affect the financial
ratios as well as the firm’s choice of risk management, performing entropy balancing and
parallel trend analyses, we can mitigate the endogeneity issue. However, the problem is not
fully eliminated. The second limitation is related to the scope of our study. While the focus of
this study is on the short-term impact of risk awareness on financial stability, it is equally
important to understand whether this relationship is persistent in the longer-term. However,
since there can be several confounding factors (for example, any changes to the macro-
economic environment or the firm’s internal operations) that can affect the results when we
considering the long-term impact of risk awareness, we choose to leave this for a future study.

Notes
1. Asset turnover declines by 11.6% in Quarter 2/2020, which equals the decrease of 0.036 divided by
the average Asset turnover in Quarter 2/2019 of 0.311. AR turnover declines by 26.4% in Quarter 2/
2020, which equals the decrease of 0.794 divided by the average AR turnover in Quarter 2/2019 of
3.008. Cash holding declines by 11.8% in Quarter 2/2020, which equals the decrease of 0.886 divided
by the average Cash/Total assets in Quarter 2/2019 of 7.535.
2. This relative change is calculated by comparing the absolute change with the average level of the
financial ratios in Quarter 1 and 2/2019, reported in Table 2. For example, Current ratio increases by
5.7% in Quarter 2/2020, which equals the change of 0.130 divided by the average Current ratio in
Quarter 2/2019 of 2.265. Quick ratio increases by 24.3% in Quarter 1/2020, which equals the change
of 0.451 divided by the average Quick ratio in Quarter 1/2019 of 1.854.
3. Debt ratio decreases by 11.4% in Quarter 1/2020, which equals the change of 0.129 divided by the
average Debt ratio in Quarter 1/2019 of 1.132.
4. Cash/Total assets ratio reduces by 15.7% in Quarter 1/2020, which equals the change of 1.218 Financial
divided by the average Cash/Total assets ratio in Quarter 1/2019 of 7.773. Cash/Total assets ratio
reduces by 14.4% in Quarter 2/2020, which equals the change of 1.084 divided by the average Cash/ stability during
Total assets ratio in Quarter 2/2019 of 7.535. COVID-19
5. Net profit margin reduces by 52% in Quarter 2/2020, which equals the change of 4.839% divided by
the average Net profit margin in Quarter 2/2019 of 9.307%.
6. These include Current ratio, Quick ratio, Debt ratio, Cash-Total assets, Asset turnover, AP turnover,
AR turnover, Inventory turnover, Net profit margin, ROA and ROE.
369
7. Our results remain consistent if we shift the outbreak of the COVID-19 pandemic ahead by one or
three-quarters.

References
Almeida, H., Campello, M., Cunha, I. and Weisbach, M.S. (2014), “Corporate liquidity management: a
conceptual framework and survey”, Annual Review of Financial Economics, Vol. 6 No. 1,
pp. 135-162.
Banerjee, R., Illes, A., Kharroubi, E. and Garralda, J.M.S. (2020), Covid-19 and Corporate Sector
Liquidity (No. 10), Bank for International Settlements, Basel.
Campello, M., Giambona, E., Graham, J.R. and Harvey, C.R. (2011a), “Liquidity management and
corporate investment during a financial crisis”, Review of Financial Studies, Vol. 24 No. 6,
pp. 1944-1979.
Campello, M., Giambona, E., Graham, J.R. and Harvey, C.R. (2011b), “Liquidity management and
corporate investment during a financial crisis”, Review of Financial Studies, Vol. 24 No. 6,
pp. 1944-1979.
Carter, D.A., Rogers, D.A. and Simkins, B.J. (2006), “Does hedging affect firm value? Evidence from the
US airline industry”, Financial Management, Vol. 35 No. 1, pp. 53-86.
DeAngelo, H. and DeAngelo, L. (2007), “Capital structure, payout policy, and financial flexibility”,
Marshall School of Business working paper no. FBE, 02-06.
De Vito, A. and Gomez, J.P. (2020), “Estimating the COVID-19 cash crunch: global evidence and
policy”, Journal of Accounting and Public Policy, Vol. 39 No. 2, p. 106741.
Didier, T., Huneeus, F., Larrain, M. and Schmukler, S.L. (2020), “Financing firms in hibernation during
the COVID-19 pandemic”, Working paper, Financial Market Commission of Chile.
Ding, C.G., Wu, C.H. and Chang, P.L. (2013), “The influence of government intervention on the
trajectory of bank performance during the global financial crisis: a comparative study among
Asian economies”, Journal of Financial Stability, Vol. 9 No. 4, pp. 556-564.
General Statistics Office of Vietnam (2020a), “The report of survey on the impact of covid-19 pandemic
on the production and operation activities of Vietnamese firms”, available at: https://www.gso.
gov.vn/default.aspx?tabid5382&idmid52&ItemID519623 (accessed 11 September 2020).
General Statistics Office of Vietnam (2020b), “The report of Vietnamese economic and social
conditions in quarter 2 and the first six months of 2020”, available at: https://www.gso.gov.vn/
default.aspx?tabid5621&ItemID519651 (accessed 11 September 2020).
Graham, J.R. and Rogers, D.A. (2002), “Do firms hedge in response to tax incentives?”, The Journal of
Finance, Vol. 57 No. 2, pp. 815-839.
Hainmueller, J. (2012), “Entropy balancing for causal effects: a multivariate reweighting method to
produce balanced samples in observational studies”, Political Analysis, Vol. 20 No. 1, pp. 25-46.
Hoang, D.P., Nguyen, V.H., Hoang, A.T. and Nguyen, X.H. (2019), “Management of nontraditional
security: a new approach”, International Journal of Engineering, Applied and Management
Sciences Paradigms, Vol. 54 No. 1, pp. 253-262.
CFRI Jensen, M.C. and Meckling, W.H. (1976), “Theory of the firm: managerial behavior, agency costs and
ownership structure”, Journal of Financial Economics, Vol. 3 No. 4, pp. 305-360.
11,3
Kuckertz, A., Br€andle, L., Gaudig, A., Hinderer, S., Reyes, C.A.M., Prochotta, A. and Berger, E.S. (2020),
“Startups in times of crisis‒A rapid response to the COVID-19 pandemic”, Journal of Business
Venturing Insights, Vol. 13, e00169.
Kumar, P. and Rabinovitch, R. (2013), “CEO entrenchment and corporate hedging: evidence from the
oil and gas industry”, Journal of Financial and Quantitative Analysis, Vol. 48 No. 3, pp. 887-917.
370
Lins, K.V., Servaes, H. and Tufano, P. (2010), “What drives corporate liquidity? An international
survey of cash holdings and lines of credit”, Journal of Financial Economics, Vol. 98 No. 1,
pp. 160-176.
Manning, C. (2010), “Globalization and labour markets in boom and crisis: the case of Vietnam”,
ASEAN Economic Bulletin, Vol. 27 No. 1, pp. 136-157, available at: http://www.jstor.org/stable/
41317113 (accessed 29 September 2020).
Merton, R.C. (1974), “On the pricing of corporate debt: the risk structure of interest rates”, The Journal
of Finance, Vol. 29 No. 2, pp. 449-470.
Nguyen, D., Diaz-Rainey, I. and Gregoriou, A. (2014), “Determinants of the capital structure of listed
Vietnamese companies”, Journal of Southeast Asian Economies, Vol. 31 No. 3, pp. 412-431,
available at: http://www.jstor.org/stable/43264737 (accessed 29 September 2020).
OECD (2020), “Food supply chains and COVID-19: impacts and policy lessons”, available at: http://
www.oecd.org/coronavirus/policy-responses/food-supply-chains-and-covid-19-impacts-and-
policy-lessons-71b57aea/ (accessed 15 August 2020).
Pincus, J. (2009), “Vietnam: sustaining growth in difficult times”, ASEAN Economic Bulletin, Vol. 26
No. 1, pp. 11-24, available at: http://www.jstor.org/stable/41317016 (accessed 29
September 2020).
Sebastiani, G., Massa, M. and Riboli, E. (2020), “Covid-19 epidemic in Italy: evolution, projections and
impact of government measures”, European Journal of Epidemiology, Vol. 35 No. 4, pp. 341-345.
Smith, C.W. and Stulz, R.M. (1985), “The determinants of firms’ hedging policies”, Journal of Financial
and Quantitative Analysis, Vol. 20 No. 4, pp. 391-405.
Stulz, R.M. (1984), “Optimal hedging policies”, Journal of Financial and Quantitative Analysis, Vol. 19
No. 2, pp. 127-140.
Tap chi tai chinh (Financial magazine). The Ministry of Finance of Vietnam (2020), “The concern of
bad debts in the second wave of Covid-19 pandemic”, available at: http://tapchitaichinh.vn/
ngan-hang/dich-covid19-tai-bung-phat-them-lo-no-xau-326290.html (accessed 21
September 2020).
Tooze, A. (2020), “Is the coronavirus crash worse than the 2008 financial crisis”, Foreign Policy,
Vol. 18.
Tufano, P. (1998), Agency Costs of Corporate Risk Management, Financial Management, pp. 67-77.
World Bank (2020), “World Bank publication”, available at: https://www.worldbank.org/en/
publication/gfdr/gfdr-2016/background/financial-stability (accessed 1 August 2020).

Further reading
Joseph, N.L. (2000), “The choice of hedging techniques and the characteristics of UK industrial firms”,
Journal of Multinational Financial Management, Vol. 10 No. 2, pp. 161-184.

Corresponding author
Lan Thi Mai Nguyen can be contacted at: lanntm@hsb.edu.vn
 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Variables Asset turnover AP turnover AR turnover Inventory turnover Current ratio Quick ratio Debt ratio Cash/Total assets Net profit margin ROA ROE

Appendix
Panel A: regression results with parallel trend assumption of the relationship between risk awareness and financial ratios
Crisis_h 3 awareness 0.0358 (0.0235) 0.0943 (0.4382) 0.4481 (0.3687) 0.4638 (0.2954) 0.0766 (0.1581) 0.0765 (0.1163) 0.0064 (0.0371) 0.9738 (0.8353) 3.6799** (1.8305) 0.3130 (0.9707) 0.4958 (2.1146)
Crisis_h 0.0552** (0.0223) 0.5649 (0.3704) 0.7319** (0.3518) 0.8361*** (0.2790) 0.0695 (0.1473) 0.0976 (0.1044) 0.0515 (0.0326) 1.2282 (0.7865) 3.2951* (1.7404) 0.7375 (0.8961) 2.1203 (1.9831)
*** ** ** *** *** ***
Firm size 0.1993 (0.0632) 3.4398 (1.5390) 1.4947 (0.7558) 0.3121 (0.9395) 2.6757 (0.5940) 2.0662 (0.5690) 1.5153 (0.1573) 0.5173 (1.7775) 3.3277 (3.3133) 3.5546 (2.7480) 17.7090*** (5.1685)
Observations 952 952 952 952 952 952 952 952 952 952 952
R-squared 0.8523 0.7861 0.8283 0.8959 0.9137 0.9223 0.9573 0.8274 0.7883 0.6012 0.5922
Robust Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Panel B: regression results with parallel trend assumption of the relationship between risk management tool utilization and financial ratios
Crisis_h 3 tool 0.0160 (0.0146) 0.1308 (0.4587) 0.0649 (0.1973) 0.2670 (0.2137) 0.1317 (0.0900) 0.0948 (0.0820) 0.0244 (0.0295) 0.4472 (0.5266) 0.4788 (1.1525) 2.0258*** (0.7520) 1.0004 (1.4950)
Crisis_h 0.0283*** (0.0090) 0.4424* (0.2540) 0.3557** (0.1425) 0.5043*** (0.1329) 0.0409 (0.0646) 0.0020 (0.0587) 0.0387 (0.0269) 0.2366 (0.3442) 0.0900 (0.6412) 0.1385 (0.4244) 1.9800** (0.8299)
Firm size 0.2018*** (0.0627) 3.4257** (1.5311) 1.4578* (0.7583) 0.2744 (0.9320) 2.6769*** (0.5905) 2.0554*** (0.5647) 1.5137*** (0.1574) 0.4122 (1.7756) 3.6730 (3.3096) 3.6681 (2.7529) 17.7209*** (5.1458)
Observations 952 952 952 952 952 952 952 952 952 952 952
R-squared 0.8519 0.7861 0.8278 0.8958 0.9138 0.9224 0.9573 0.8272 0.7867 0.6050 0.5924
Robust Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Panel C: Regression results with parallel trend assumption of the relationship between financial risk awareness and financial ratios
Crisis_h 3 FinAwareness 0.0199 (0.0145) 0.5175 (0.4291) 0.0154 (0.2156) 0.1212 (0.2056) 0.0901 (0.1020) 0.0170 (0.0929) 0.0011 (0.0356) 0.0163 (0.5422) 1.2372 (1.0791) 0.8449 (0.7080) 2.5539* (1.3810)
Crisis_h 0.0339*** (0.0112) 0.2113 (0.3078) 0.3446** (0.1719) 0.4911*** (0.1411) 0.0487 (0.0795) 0.0389 (0.0703) 0.0453*** (0.0154) 0.3606 (0.4378) 0.6930 (0.7708) 0.0228 (0.5278) 3.0084*** (1.0302)
Firm size 0.2035*** (0.0628) 3.4571** (1.5253) 1.4546* (0.7583) 0.2633 (0.9330) 2.6870*** (0.5909) 2.0586*** (0.5657) 1.5147*** (0.1581) 0.4319 (1.7772) 3.7144 (3.3453) 3.5399 (2.7362) 17.8802*** (5.1563)
Observations 952 952 952 952 952 952 952 952 952 952 952
R-squared 0.8521 0.7865 0.8278 0.8956 0.9138 0.9223 0.9573 0.8271 0.7871 0.6020 0.5942
Robust Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Panel D: regression results with parallel trend assumption of the relationship between special risk awareness and financial ratios
Crisis_h 3 SpecAwareness 0.0105 (0.0159) 0.6989 (0.4532) 0.3979* (0.2263) 0.3131 (0.2329) 0.0582 (0.1061) 0.0618 (0.1014) 0.0212 (0.0470) 0.5600 (0.5813) 0.1969 (1.0827) 0.3760 (0.7831) 1.0723 (1.4955)
Crisis_h 0.0273*** (0.0085) 0.2326 (0.2570) 0.4770*** (0.1321) 0.3183*** (0.1190) 0.0225 (0.0617) 0.0082 (0.0544) 0.0534*** (0.0132) 0.5673* (0.3192) 0.1231 (0.6825) 0.5945 (0.3998) 2.0636** (0.8119)
***
Firm size 0.2017 (0.0631) 3.3803** (1.5276) 1.4818* (0.7559) 0.2544 (0.9272) 2.6783*** (0.5930) 2.0550*** (0.5673) 1.5162*** (0.1563) 0.4713 (1.7832) 3.6386 (3.3048) 3.5553 (2.7362) 17.6889*** (5.1516)
Observations 952 952 952 952 952 952 952 952 952 952 952
R-squared 0.8518 0.7869 0.8286 0.8959 0.9137 0.9223 0.9573 0.8273 0.7867 0.6013 0.5925
Robust Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Firm FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Note(s): This table provides regression results with parallel trend assumption for the relationship between risk awareness, financial, special risk awareness
and firms’ financial ratios from Quarter 1/2019 to Quarter 4/2019. For the parallel trend assumption, we shift the COVID-19 pandemic ahead by two-quarters
and only examine the firms’ financial data in the year 2019. Panel A reports the results when we examine firms’ risk awareness. Panel B documents the results
examining firms’ risk management tools. Panel C focusses on firms’ financial risk awareness. And Panel D reports the results examining firms’ special risk
awareness. Table 1 provides a detailed description of the variables. *, ** and *** represent significance levels of 10, 5 and 1%, respectively, for the two-tailed
T-test
COVID-19

371
stability during

regression results with

awareness and
financial, special risk

financial stability –
Financial

Risk awareness,
Table A1.

parallel trend
assumption