What Exacerbates the Probability of Business Closure in the Private Sector During the COVID-19 Pandemic? Evidence from World Bank Enterprise Survey Data

The purpose of the study is to look into the likelihood of private sector enterprises going bankrupt due to COVID-19 pandemic-related issues. The data for this study was taken from the World Bank’s Enterprise Survey, which was intended to assess the impact of the COVID-19 pandemic on the business sector. This study uses the Ordinal Logit Method to analyze the model with dependent variables having ordinal values. The determinants reflect business performance, innovation, business relationships, and government support. According to the estimation results, a lower probability of business closures, illiquidity, and payment delays are found in businesses that maintain sales growth, operating hours, temporary workers, product portfolio, consumer demand, and input supply. Meanwhile, the increase in online business activities and receiving support from financial institutions and the government do not help businesses reduce the risk. Moreover, higher survival is found in manufacturing and developing countries. This implies the fragility of businesses in the retail and service sectors, especially for mega-enterprises in developed countries. In addition, the negative impact of the COVID-19 pandemic on businesses in Europe and West Asia is less severe than in other regions. The results imply policies to support the private sector during the pandemic, such as increasing labor market flexibility or rapidly implementing supportive policies.