GVC and credit risk in times of exogenous shocks

GVC and credit risk in times of exogenous shocks | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article GVC and credit risk in times of exogenous shocks Filomena Pietrovito, Chiara Franco This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6617087/v1 This work is licensed under a CC BY 4.0 License Status: Under Review Version 1 posted 5 You are reading this latest preprint version Abstract This paper aims at investigating the relationship between firm’s participation in global value chains (GVC) and its credit risk, measured through delayed and overdue obligations and insolvency risk. Borrowing from the existing literature, the hypothesis under scrutiny is that GVC participation positively affects firm’s performance in terms of credit risk. To empirically test this hypothesis, we adopt survey data from the World Bank, integrating information on firms’ financial performances during the COVID-19 pandemic with their pre-pandemic GVC involvement. Our dataset includes more than 10,500 firms operating in 30 countries, over the years 2019 and 2021. We adopt a probit model to estimate the impact of GVC participation on the probability of experiencing payment delays, overdue payments, and insolvency risk, while controlling for relevant firm-specific characteristics. To address potential endogeneity concerns, we implement a recursive bivariate probit model, which allows us to examine both the direct and indirect effects of GVC participation. Our empirical findings demonstrate that firms with higher levels of international orientation exhibit a lower probability of experiencing credit repayment difficulties and insolvency risk. We find that GVC participation reduces the probability of delayed payments by 8%, overdue payments by 3%, and insolvency risk by approximately 2%. JEL classification: F23, F61, G32 credit risk global value chains COVID-19 Full Text Cite Share Download PDF Status: Under Review Version 1 posted Editorial decision: Revisions needed 28 Oct, 2025 Reviewers agreed at journal 14 May, 2025 Reviewers invited by journal 09 May, 2025 Editor assigned by journal 09 May, 2025 First submitted to journal 08 May, 2025 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-6617087","acceptedTermsAndConditions":true,"allowDirectSubmit":false,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":454187131,"identity":"091c8bd3-e554-48c2-942e-db5002064051","order_by":0,"name":"Filomena Pietrovito","email":"data:image/png;base64,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","orcid":"https://orcid.org/0000-0002-3768-9791","institution":"University of Molise Department of Economics: Universita degli Studi del Molise Dipartimento di Economia","correspondingAuthor":true,"prefix":"","firstName":"Filomena","middleName":"","lastName":"Pietrovito","suffix":""},{"id":454187132,"identity":"52100346-4f22-4101-9b28-6cbc00f9d3e9","order_by":1,"name":"Chiara Franco","email":"","orcid":"","institution":"University of Pisa Department of Political and Social Sciences: Universita degli Studi di Pisa Dipartimento di Scienze Politiche","correspondingAuthor":false,"prefix":"","firstName":"Chiara","middleName":"","lastName":"Franco","suffix":""}],"badges":[],"createdAt":"2025-05-08 06:05:44","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-6617087/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-6617087/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":82612637,"identity":"8e2caf69-fdcf-40b8-8c08-e067b0d36674","added_by":"auto","created_at":"2025-05-13 11:08:25","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":389772,"visible":true,"origin":"","legend":"","description":"","filename":"GVCandcreditriskmanuscript.pdf","url":"https://assets-eu.researchsquare.com/files/rs-6617087/v1_covered_62ab5fd1-07ae-49be-b821-fb03bc4f6391.pdf"}],"financialInterests":"","formattedTitle":"GVC and credit risk in times of exogenous shocks","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":false,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":true,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"review-of-world-economics","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":false,"externalIdentity":"rowe","sideBox":"Learn more about [Review of World Economics](http://link.springer.com/journal/10290)","snPcode":"10290","submissionUrl":"https://www.editorialmanager.com/rowe/default2.aspx","title":"Review of World Economics","twitterHandle":"","acdcEnabled":true,"dfaEnabled":true,"editorialSystem":"em","reportingPortfolio":"Springer Hybrid","inReviewEnabled":true,"inReviewRevisionsEnabled":false},"keywords":"credit risk, global value chains, COVID-19","lastPublishedDoi":"10.21203/rs.3.rs-6617087/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-6617087/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis paper aims at investigating the relationship between firm’s participation in global value chains (GVC) and its credit risk, measured through delayed and overdue obligations and insolvency risk. Borrowing from the existing literature, the hypothesis under scrutiny is that GVC participation positively affects firm’s performance in terms of credit risk. To empirically test this hypothesis, we adopt survey data from the World Bank, integrating information on firms’ financial performances during the COVID-19 pandemic with their pre-pandemic GVC involvement. Our dataset includes more than 10,500 firms operating in 30 countries, over the years 2019 and 2021. We adopt a probit model to estimate the impact of GVC participation on the probability of experiencing payment delays, overdue payments, and insolvency risk, while controlling for relevant firm-specific characteristics. To address potential endogeneity concerns, we implement a recursive bivariate probit model, which allows us to examine both the direct and indirect effects of GVC participation. Our empirical findings demonstrate that firms with higher levels of international orientation exhibit a lower probability of experiencing credit repayment difficulties and insolvency risk. 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