The COVID-19 Shock and Equity Shortfall: Firm-Level Evidence from Italy

Carletti, Elena; Oliviero, Tommaso; Pagano, Marco; Pelizzon, Loriana; Subrahmanyam, Marti G.

doi:10.1093/rcfs/cfaa014

Cited by 116 publications

(70 citation statements)

References 10 publications

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“…Studies that use data on small firms for European countries (e.g. Demmou, Franco, Sara and Dlugosch (2020); Carletti, Oliviero, Pagano, Pelizzon and Subrahmanyam (2020); Schivardi and Romano (2020); Cros, Epaulard and Martin (2021); Coeuré (2021)) do not rely on a structural model of the firm and often consider a simple empirical rule to project cash flow under COVID-19. Some studies also explore the question of solvency related bankruptcies, while we limit our focus to liquidity related bankruptcies, as in our previous work that also focused on SME failures in the absence of I-O network (Gourinchas et al (2020(Gourinchas et al ( , 2021a.)…”

Section: Literaturementioning

confidence: 99%

Fiscal Policy in the Age of COVID: Does it ‘Get in all of the Cracks?’

Gourinchas

Kalemli‐Özcan

Penciakova

et al. 2021

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We study the effects of fiscal policy in response to the COVID-19 pandemic at the firm, sector, country and global level. First, we estimate the impact of COVID-19 and policy responses on small and medium sized enterprise (SME) business failures. We combine firm-level financial data from 50 sectors in 27 countries, a detailed I-O network, real-time data on lockdown policies and mobility patterns, and a rich model of firm behavior that allows for several dimensions of heterogeneity. We find: (a) Absent government support, the failure rate of SMEs would have increased by 9 percentage points, significantly more so in emerging market economies (EMs). With policy support it only increased by 4.3 percentage points, and even decreased in advanced economies (AEs). (b) Fiscal policy was poorly targeted: most of the funds disbursed went to firms who did not need it. (c) Nevertheless, we find little evidence of the policy merely postponing mass business failures or creating many 'zombie' firms: failure rates rise only slightly in 2021 once policy support is removed. Next, we build a tractable global intertemporal general equilibrium I-O model with fiscal policy. We calibrate the model to 64 countries and 36 sectors. We find that: (d) a sizable share of the global economy is demand-constrained under COVID-19, especially so in EMs. (e) Globally, fiscal policy helped offset about 8% of the downturn in COVID, with a low 'traditional' fiscal multiplier. Yet it significantly reduced the share of demand-constrained sectors, preserving employment in these sectors. (f) Fiscal policy exerted small and negative spillovers to output in other countries but positive spillovers on employment. (g) A two-speed recovery would put significant upwards pressure on global interest rates which imposes an additional headwind on the EM recovery.(h) Corporate and sovereign spreads rise when global rates increase, suggesting that EM may face challenging external funding conditions as AEs economies normalize.

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Section: Literaturementioning

confidence: 99%

Fiscal Policy in the Age of COVID: Does it ‘Get in all of the Cracks?’

Gourinchas

Kalemli‐Özcan

Penciakova

et al. 2021

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“…13 Philippon (2020) compares the social value of a firm to the recovery value of assets as the criteria for continuation of a firm, and designs incentive compatible government participation and guarantees. Carletti et al (2020) perform a sensitivity analysis to assess the impact on Italian firms' equity of a 3 months lockdown; they note that a recapitalization of firms facing equity shortfall as a result of the pandemic may not suffice to restore viability because many firms had weak pre-pandemic balance sheets.…”

Section: Literaturementioning

confidence: 99%

Global Corporate Stress Tests—Impact of the COVID-19 Pandemic and Policy Responses

Tressel¹,

Ding²

2021

IMF Working Papers

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Corporate sector vulnerabilities have been a central policy topic since the outset of the COVID-19 pandemic. In this paper, we analyze some 17,000 publicly listed firms in a sample of 24 countries, and assess their ability to withstand shocks induced by the pandemic to their liquidity, viability and solvency. For this purpose, we develop novel multi-factor sensitivity analysis and dynamic scenariobased stress test techniques to assess the impact of shocks on firm's ability to service their debt, and on their liquidity and solvency positions. Applying the October 2020 WEO baseline and adverse scenarios, we find that a large share of publicly-listed firms become vulnerable as a result of the pandemic shock and additional borrowing needs to overcome cash shortfalls are large, while firm behavioral responses and policies substantially help overcome the impact of the shock in the near term. Looking forward, while interest coverage ratios tend to improve over time after the initial shock as earnings recover in line with projected macroeconomic conditions, liquidity needs remain substantial in many firms across countries and across industries, while insolvencies rise over time in specific industries. To inform policy debates, we offer an approach to a triage between viable and unviable firms, and find that the needs for liquidity support of viable firms remain important beyond 2020, and that medium-term debt restructuring needs and liquidations of firms may be substantial in the medium-term.

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“…In addition, Acharya and Steffen recommend this as insolvency prevention [33]. Carletti et al have indicated radical decline of profits, which would continue in post-pandemic times due to the phenomenon of increasing social poverty [34]. The slight continuing decline of stock prices stated by Ramelli and Wagner is an only logic consequence of this fact [35].…”

Section: Literature Reviewmentioning

confidence: 99%

Intrinsic Motivation Sources as Pillars of Sustainable Internal Marketing Communication in Turbulent Post-Pandemic Times

Majerová¹,

Gajanova

Nadányiová

et al. 2021

Sustainability

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The main aim of the article is to identify the changes in employees’ sources of intrinsic motivation caused by the impact of the COVID-19 pandemic, and to discuss prospective modifications to formulated patterns of internal marketing communication. The novelty of the research lies in two main aspects: (1) the necessity to revise the traditional concept of motivation caused by the pandemic and (2) own methodological approach. While the first aspect reflects the lack of appropriate scientific attention paid to this issue, the second aspect develops methodological approaches applied so far in the research of intrinsic motivation sources. The goal of the paper has been achieved via own questionnaire research of the traditional quadratic structure of the intrinsic motivation sources of employees. The data from socio-demographically representative sample of 2000 respondents have been in accordance with contemporary trends in managerial analytics analysed via factor analysis and relevant statistic tests. It has been found that the ranking of intrinsic motivation sources before the COVID-19 pandemic was the following: (1) sense of choice; (2) sense of meaningfulness; (3) sense of progress and (4) sense of competence. The ranking of intrinsic motivation sources during the COVID-19 pandemic was the following: (1) sense of choice; (2) sense of progress; (3) sense of meaningfulness; and (4) sense of competence. Based on the identified changes in intrinsic motivation sources and their components, it can be stated that the pandemic has significantly influenced the existing principles and patterns of internal marketing communication. These should be critically reconsidered, and motivation systems should be revised to contribute to the optimal performance of the company on the market and its sustainable development by focusing on the financial situation of the company, significant for the economic pillar; the change in individual value scales, significant for the environmental pillar; and the phenomenon of millennials, significant for the social pillar. By intersecting these pillars, sustainability can be reached based on finding optimum motivation.

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The COVID-19 Shock and Equity Shortfall: Firm-Level Evidence from Italy

Cited by 116 publications

References 10 publications

Fiscal Policy in the Age of COVID: Does it ‘Get in all of the Cracks?’

Fiscal Policy in the Age of COVID: Does it ‘Get in all of the Cracks?’

Global Corporate Stress Tests—Impact of the COVID-19 Pandemic and Policy Responses

Intrinsic Motivation Sources as Pillars of Sustainable Internal Marketing Communication in Turbulent Post-Pandemic Times

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