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Estimating the COVID-19 cash crunch: Global evidence and policy

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dc.contributor.authorGómez, Juan Pedro
dc.contributor.authorDe Vito, Antonio
dc.contributor.editorTrombetta, Marco
dc.contributor.funderMinisterio de Economía y Competitividad
dc.contributor.funderAgencia Estatal de Investigación
dc.contributor.funderEuropean Regional Development Fund
dc.contributor.rorhttps://ror.org/02jjdwm75
dc.date.accessioned2024-10-22T18:02:07Z
dc.date.available2024-10-22T18:02:07Z
dc.date.issued2020-04
dc.description.abstractIn this paper, we investigate how the COVID-19 health crisis could affect the liquidity of listed firms across 26 countries. We stress-test three liquidity ratios for each firm with full and partial operating flexibility in two simulated distress scenarios corresponding to drops in sales of 50% and 75%, respectively. In the most adverse scenario, the average firm with partial operating flexibility would exhaust its cash holdings in about two years. At that point, its current liabilities would increase, on average, by eight times, suggesting that the average firm would have to resort to the debt market to prevent a liquidity crunch. Moreover, about 1/10th of all sample firms would become illiquid within six months. Finally, we study two different fiscal policies, tax deferrals and bridge loans, that governments could implement to mitigate the liquidity risk. Our analysis suggests bridge loans are more cost-effective to prevent a massive cash crunch.
dc.description.peerreviewedyes
dc.description.statusPublished
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dc.identifier.citationDe Vito, A., & Gómez, J. P. (2020). Estimating the COVID-19 cash crunch: Global evidence and policy. Journal of Accounting and Public policy, 39(2), 106741. https://doi.org/10.1016/j.jaccpubpol.2020.106741
dc.identifier.doihttps://doi.org/10.1016/j.jaccpubpol.2020.106741
dc.identifier.issn1873-2070
dc.identifier.urihttps://hdl.handle.net/20.500.14417/3294
dc.issue.number2
dc.journal.titleJournal of Accounting and Public Policy
dc.language.isoen
dc.publisherElsevier
dc.relation.departmentFinance
dc.relation.entityIE University
dc.relation.projectIDPGC2018-101745-A-I00
dc.relation.schoolIE Business School
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 International
dc.rights.accessRightsinfo:eu-repo/semantics/openAccess
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/
dc.subject.keywordCOVID-19
dc.subject.keywordCash crunch
dc.subject.keywordLiquidity risk
dc.subject.keywordBusiness taxes
dc.subject.keywordFiscal policies
dc.subject.keywordBridge loans
dc.titleEstimating the COVID-19 cash crunch: Global evidence and policy
dc.typeinfo:eu-repo/semantics/article
dc.version.typeinfo:eu-repo/semantics/publishedVersion
dc.volume.number39
dspace.entity.typePublication
relation.isAuthorOfPublication4c2d4d21-bbf8-4935-96bc-6475146ceea7
relation.isAuthorOfPublication8af307ca-1d75-4ed1-b43a-b06997510ff9
relation.isAuthorOfPublication.latestForDiscovery4c2d4d21-bbf8-4935-96bc-6475146ceea7
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