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COVID-19 and Corporate Finance

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Abstract

We distill evidence about the effects of COVID-19 on companies. Stock price reactions to the shock differed greatly across firms, depending on their resilience to social distancing, financial flexibility, and corporate culture. The same characteristics affected the response of firms’ sales, employment, and asset growth. Despite the shock, firms expanded their balance sheets and liquidity by raising funds from banks, bonds, and equity markets. While listed firms reduced their leverage, unlisted ones, especially small and medium enterprises, increased it. Government support programs helped firms access external funding. We conclude by identifying unexplored research issues regarding the long-run effects of COVID-19 on companies.

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  • Marco Pagano & Josef Zechner, 2022. "COVID-19 and Corporate Finance," CSEF Working Papers 651, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:651
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    Cited by:

    1. Yao, Yanming & Luo, Pengfei, 2023. "Optimal capital structure and credit spreads under pandemic shocks," Economics Letters, Elsevier, vol. 224(C).
    2. Beck, Thorsten & Peltonen, Tuomas & Perotti, Enrico & Sánchez Serrano, Antonio & Suarez, Javier, 2023. "Corporate credit and leverage in the EU: recent evolution, main drivers and financial stability implications," Report of the Advisory Scientific Committee 14, European Systemic Risk Board.
    3. Elham Daadmehr, 2024. "Workplace sustainability or financial resilience? Composite-financial resilience index," Risk Management, Palgrave Macmillan, vol. 26(2), pages 1-35, May.
    4. Pagano, Marco & Wagner, Christian & Zechner, Josef, 2023. "Disaster resilience and asset prices," Journal of Financial Economics, Elsevier, vol. 150(2).
    5. Giorgio Calcagnini & Federico Favaretto & Germana Giombini, 2024. "The effect of 2020 lockdown on bank internal ratings," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 51(2), pages 355-396, June.
    6. Pettenuzzo, Davide & Sabbatucci, Riccardo & Timmermann, Allan, 2023. "Payout suspensions during the Covid-19 pandemic," Economics Letters, Elsevier, vol. 224(C).

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    More about this item

    Keywords

    COVID-19; pandemic; firm resilience; social distancing; financial flexibility; corporate culture; credit supply; leverage; government support; public loan guarantees; Paycheck Protection Program.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid

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