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COVID-19 Shock and Interest Expense Stickiness: Evidence from Chinese Listed Firms

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  • Rui Wang
  • Haomin Wang
  • Yi Chen

Abstract

The COVID-19 pandemic subjected firms to liquidity pressure and financing difficulties. Our study examines bank credit availability in response to the pandemic by testing the firm’s interest expense stickiness. We found that interest expense stickiness was widespread in Chinese listed firms, particularly in state-owned enterprises and large firms. Moreover, interest expenses were stickier during COVID-19 compared to before COVID-19. Interest expense stickiness gradually increased in private and small firms after the COVID-19, indicating that banks provided more credit support for these firms after their sharp revenue declines. Finally, we found that the stronger interest expense stickiness could improve firm’s performance.

Suggested Citation

  • Rui Wang & Haomin Wang & Yi Chen, 2023. "COVID-19 Shock and Interest Expense Stickiness: Evidence from Chinese Listed Firms," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(8), pages 2356-2369, June.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:8:p:2356-2369
    DOI: 10.1080/1540496X.2021.1990750
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