The impact of COVID-19 on firm risk and performance in MENA countries: Does national governance quality matter?

This study investigates the impact of the COVID-19 crisis on firm risk and firm performance and how country-level governance quality influences their relationships. Analyzing a sample of 739 non-financial listed firms in 12 MENA (Middle East and North Africa) countries for the period of 2011–2020, we find that the COVID-19 crisis has negatively impacted the performance of firms, and especially low-performing firms; has caused damage to most of 17 industries; and increased firm risk overall. Furthermore, we find that national governance quality plays an important role in mitigating the negative impact of the COVID-19 crisis on firm operations. Specifically, national governance quality reduces the negative impact of COVID-19 on firm performance and the positive impact of the crisis on firm risk. The results are consistent with our contention that effective national governance contributes to creating a positive environment for businesses’ activities and reduces economic shocks.