THE IMPACT OF NATURAL DISASTERS AND PANDEMICS ON THE PERFORMANCE OF FINANCIAL AND COOPERATIVE WORLD.

 Natural disasters such as earthquakes, floods, typhoons, and hurricanes inflict serious damage and so seem to be bad for the economy. For firms or companies, natural disasters destroy tangible assets such as buildings and equipment as well as human capital and thereby deteriorate their production capacity. These adverse impacts may sometimes be fatal to the firms and result in them being forced to close down.

Nevertheless the academic evidence on the economic impact of natural disasters is mixed. As reviewed in surveys such as Noy and Vu (2010) and Loayza et al. (2012), the existing studies report that natural disasters may even promote growth. One possible mechanism behind this positive impact is the enhancement of the productivity of the economy’s corporate sector – as reported in Skidmore and Toya (2002) and Crespo Cuaresma et al (2008). But because these studies use aggregate data, they cannot answer why and how corporate productivity improves due to natural disasters. We thus need analyses that use micro-data to clarify the mechanisms through which natural disasters affect the productivity of an economy’s corporate sector.

Impacts of Natural disasters on corporate on the performance of financial and cooperative world. 

Creative destruction

A channel through which natural disasters may enhance corporate productivity is the improvement in the productivity of firms that survive the disasters, which is due to the update of their capital stock and the adoption of new technologies. This mechanism is often called creative destruction. There is some evidence for this hypothesis, although mixed. De Mel et al (2011) find that the firms that suffered more damage to their assets because of the devastating tsunami in Sri Lanka in 2004 exhibited smaller profits, sales, and capital stock.1 Cole et al. (2013) and Tanaka (2015) find that the plants located in the most devastated districts during the 1995 Kobe Earthquake exhibited smaller employment and value-added growth. These findings are inconsistent with creative destruction. On the other hand, Hosono et al. (2012) who also focus on the Kobe Earthquake find more investment by the firms located inside the affected area than those located outside, supporting the creative destruction hypothesis.  Also consistent with this hypothesis, Leiter et al (2009) find that European firms located in regions affected by a major flood in 2000 had higher asset and employment growth as compared with non-affected firms, although they also find that the firms in the affected regions exhibited smaller value-added. Finally, Cole et al (2013) find some evidence for a short-run increase in the productivity of damaged plants after the Kobe Earthquake, although they also report that this effect disappeared over time.

Firm or company selection

Aside from the channel through survived firms, there is another potentially important channel through which natural disasters may affect the corporate sector: the selection, or exit, of firms due to the disasters. If natural disasters expel inefficient firms, or if natural selection is at work, then the average corporate productivity will increase. However, to the extent that efficient firms are also forced to exit, or an unnatural selection is at work, then the overall impact is unclear.

Compared to the effect of natural disasters on surviving firms, the empirical evidence on the firms’ post-disaster exits is scant. To fill this gap, a team of researchers including these authors examined the selection of firms in the form of bankruptcy after the Tohoku Earthquake in Japan that occurred on March 11, 2011 (Uchida et al 2014a). In the subsequent sections, we report our findings from this study.

Negative impacts of natural disasters

Health Risks

Aside from the obvious immediate danger that natural disasters present, the secondary effects can be just as damaging. Severe flooding can result in stagnant water that allows breeding of waterborne bacteria and malaria-carrying mosquitos. Without emergency relief from international aid organizations and others, death tolls can rise even after the immediate danger has passed

Displaced Populations

One of the most immediate effects of natural disasters is population displacement. When countries are ravaged by earthquakes or other powerful forces of nature, many people have to abandon their homes and seek shelter in other regions. A large influx of refugees can disrupt accessibility of health care and education, as well as food supplies and clean water.

Emotional Aftershocks

Natural disasters can be particularly traumatic for young children. Confronted with scenes of destruction and the deaths of friends and loved ones, many children develop post-traumatic stress disorder (PTSD), a serious psychological condition resulting from extreme trauma. Left untreated, children suffering from PTSD can be prone to lasting psychological damage and emotional distress.

Food Scarcity

After natural disasters, food often becomes scarce. Thousands of people around the world go hungry as a result of destroyed crops and loss of agricultural supplies, whether it happens suddenly in a storm or gradually in a drought. As a result, food prices rise, reducing families’ purchasing power and increasing the risk of severe malnutrition or worse. The impacts of hunger following an earthquake, typhoon or hurricane can be tremendous, causing lifelong damage to children’s development.

There is no universally applicable definition of pandemics however, it can be said that a pandemic is the increase and sustained propagation of an extraordinary infectious human disease that rapidly effects all parts of the world and large part of the globe population for example the current covid-19 pandemic that is in the world.

Pandemics have impacted on the financial and cooperate in terms of performance in the following ways.

Infectious disease

Infectious disease outbreaks can easily cross borders to threaten economic and regional stability, as has been demonstrated by the HIV, H1N1, H5N1, and SARS epidemics and pandemics (Verikios, Sullivan, Stojanovski, Giesecke, & Woo, 2015). Beyond the debilitating, sometimes fatal, consequences for those directly affected, pandemics have a range of negative social, economic and political consequences (Davies, 2013a). As an example,“The impact of pandemic influenza ie. H1N1 in 2009 was not just on mortality, but also on health-care systems, animal health, agriculture, education, transport, tourism and the financial sector. In short, a pandemic event threatens all aspects of the economic and social fabric” (Drake, Chalabi, & Coker, 2012). For another example, the SARS in 2003 and the Ebola pandemics, in 2013 and 2015 respectively, disrupted the economies and social order in China and West Africa as well as causing death and illness. Ebola and other pandemics have reduced the life quality of families and communities, and Ebola has disrupted essential services such as education, transport, and tourism, reduced the West African economies and isolated populations, which had impacts beyond Africa too due to the global effort of containing the outbreak (Nabarro & Wannous, 2016).

Social impacts 

Social impacts of pandemics are severe, this includes travel restricted travel, and schools closing, markets and sporting are closed. All these are a likely reality should a pandemic with true potential for high morbidity and mortality emerges.  Population mobility is also a key factor. Movement was difficult and the travel including visiting families, carrying goods to markets are restricted by military check points. The closure of airports and cancellation of flights affected many people’s travel, livelihood, and family life. With the rapid development in worldwide aviation over the last two decades, the risk of global pandemics has escalated with increased passenger traffic. With modern and efficient air travel, SARS, which originated from southern China, was rapidly transmitted to more than 30 countries in early 2003 (Wong & Leung, 2007). Closing the airports harmed the economy of the affected regions.