Article: Estimating the COVID-19 cash crunch: Global evidence and policy
Journal of Accounting and Public Policy
Abstract: ... cash crunch © 2020 The Author(s) ... In this paper, we investigate how the COVID-19 health crisis could affect the liquidity of listed ... we study two different fiscal policies, tax deferrals and bridge loans, that governments could implement ...
| Abstract | In 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 © 2020 The Author(s) |
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| Keywords | covid19 |
| Publisher | WHO |
| Document type | Article |
| Note | WHO #Covidence: #824250 |
| Database | COVID19 |
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