Multistate Models for the Recovery Process in the Covid-19 Context: An Empirical Study of Chinese Enterprises

Abstract

The Covid-19 pandemic has severely affected enterprises worldwide. It is thus of practical significance to study the process of enterprise recovery from Covid-19. However, the research on the effects of relevant determinants of business recovery is limited. This article presents a multistate modeling framework that considers the determinants, recovery time, and transition likelihood of Chinese enterprises by the state of those enterprises as a result of the pandemic (recovery state), with the help of an accelerated failure time model. Empirical data from 750 enterprises were used to evaluate the recovery process. The results indicate that the main problems facing non-manufacturing industries are supply shortages and order cancellations. With the increase of supplies and orders, the probability of transition between different recovery states gradually increases, and the recovery time of enterprises becomes shorter. For manufacturing industries, the factors that hinder recovery are more complex. The main problems are employee panic and order cancellations in the initial stage, employee shortages in the middle stage, and raw material shortages in the full recovery stage. This study can provide a reference for enterprise recovery in the current pandemic context and help policymakers and business managers take necessary measures to accelerate recovery.

Keywords

Accelerated failure time model / China / Covid-19 / Enterprise recovery process / Multistate model / Recovery state

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