Corporate liquidity, supply chain and cost issues awareness within the Covid-19 context: evidence from us management reports’ textual analysis

Abstract

Purpose The purpose of this study is to assess the management responses and intentions of 3,279 US firms from all industries, before and after the coronavirus outbreak, to identify the level of managerial concern about specific financial issues and potential economic costs of the COVID-19 pandemic. Design/methodology/approach This paper uses textual analysis of official management reports to search for specific single words in five domains related to corporate finance and governance. This paper focuses on the relative frequency of single words using a weighting scheme that adjusts for document length and for the inverse document frequency. This paper then uses t-tests to investigate the univariate differences across groups of reports before and after the US stock market crash in February 2020. Findings The applied textual and empirical analysis provides evidence that firms’ primary concerns relate to the disruption in supply chains, liquidity need and coronavirus-led recession. This paper also shows that the main cost reduction measure they are considering is salary reduction, rather than workforce reduction. This paper also shows evidence that firm managers are rather swift to provide coronavirus-related information in the US Securities and Exchange Commission (SEC) corporate filings. Practical implications The findings provide a primary view of the directions, on which US firms will move in the near future, and thus, they can be used as tools for the formulation of appropriate government policies in the corresponding sectors, which could mitigate the economic risks related to the pandemic. At the business level, the disseminated knowledge can assist firms either in the same sector or in similar/related sectors to “locate” themselves within the map of the pandemic and to adjust or align correspondingly their strategies and decisions as they will have a view of the bigger picture. Originality/value The empirical analysis divulges US firms’ management primary concerns after the COVID-19 outbreak, and thus, offers insights to the processes taking place in the US business community and the formulating new corporate and economic reality.

Integrated reporting, textual risk disclosure and market value

“…Previous studies have examined the relationship between risk disclosure and, e.g. country's level of corruption (Agyei-Mensah, 2017b); potential economic costs of the COVID-19 pandemic (Fassas et al, 2021); role of media (Zaman et al, 2018); financial performance (Oino, 2019); corporate governance (Lepore et al, 2018;Agyei-Mensah, 2017a); ownership structure (Elmagrhi et al, 2016); board of directors' composition (Torchia and Calabro, 2016); country's regulative pressures (Crawford and Williams, 2010); legitimacy tactics (Rudkin et al, 2019).…”

Does the efficiency of working capital management affect a firm’s financial distress? Evidence from UAE

“…Efficient WCM involves planning and controlling current properties and liabilities in a manner that removes the threat of a lack of ability to satisfy quick-term obligations, while additionally fending off excessive funding in belongings at an equal time. On the financial front, coronavirus has accelerated the primary trends in progress (Fassas et al , 2021). Policymakers can make assumptions about one-of-a-kind paths that the future must follow, primarily based on monetary theory (Struwig and Watson, 2021).…”

The role of labor in cash holdings: Evidence from the supply-side impact of COVID-19

“…These larger disruptions in the production of high-CWE firms result in higher business risk, thereby giving such firms more incentive to hold precautionary cash. As evidence, Fassas et al (2021) reveal that firms during COVID-19 use more terms related to liquidity perceptions and risks in their corporate fillings. Second, a firm with high CWE could find it harder to retain or attract workers because of its increasing business risk or employees’ preference toward jobs with a high remote work capacity during the COVID-19 pandemic.…”