Liquidity shortfalls during the COVID-19 outbreak: Assessment and policy responses

doi:10.1787/581dba7f-en

Cited by 14 publications

(4 citation statements)

References 3 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…From a methodological point of view, our work sits along the same lines as that of , Demmou et al (2021a;2021b), Schivardi & Romano (2021), Carletti et al (2021 and . Most central banks (Anayi et al, 2020;Blanco et al, 2020;Tielens et al, 2021) and major institutions (Maurin & Rozália, 2020;Connell Garcia & Ho, 2021;Soledad Martinez-Peria et al, 2021) have also conducted similar exercises to ours.…”

Section: Construction Of Series Of Turnovermentioning

confidence: 77%

See 1 more Smart Citation

Liquidity Shortfalls during the COVID-19 Outbreak: Assessment and Policy Responses

Demmou¹,

Franco²,

Calligaris³

et al. 2022

Ecostat

View full text Add to dashboard Cite

We study the impact of the health crisis on the activity of more than 645,000 French companies using individual data to estimate their monthly turnover. Our microsimulation model is innovative in three ways. First, we quantify the loss of activity with respect to a non-crisis counterfactual situation to take into into account companies' growth trajectories before the pandemic when discussing the consequences of the crisis. Second, we estimate this shock at the individual level to study the heterogeneity of loss of business. We highlight the disparities of the shock both between and within sectors. The sector explains up to 48% of the variance of the monthly activity shocks observed in 2020, a much larger proportion than in a normal year. Finally, we identify four profiles of activity trajectories in 2020. The industry is the primary determinant of belonging to these profiles. Conditionally to the sector, these profiles are also correlated with the organisational adaptation of companies.

show abstract

Section: Construction Of Series Of Turnovermentioning

confidence: 77%

“…In other words, the company has a need for financing only when it is conceptually in a "negative cash" situation at the end of 2020 (a situation referred to as "illiquidity" in Demmou et al, 2021aDemmou et al, , 2021bSchivardi & Romano, 2021;.…”

Section: From the Variation In Cash To The Operational Need For Finan...mentioning

confidence: 99%

Liquidity Shortfalls during the COVID-19 Outbreak: Assessment and Policy Responses

Demmou¹,

Franco²,

Calligaris³

et al. 2022

Ecostat

View full text Add to dashboard Cite

show abstract

“…At that time, half of all businesses with monthly expenses of 10.000 USD had available cash in hand to cover ongoing expenses only for two weeks. Demmou et al (2021) also explain that without any policy intervention, up to 38% of firms would face liquidity shortfalls after ten months after the implementation of confinement measures.…”

Section: Introductionmentioning

confidence: 97%

Corporate Liquidity in Coronacrisis: Experience of Serbian Economy

Dejvak¹

2023

CEBR

View full text Add to dashboard Cite

The appearance of coronavirus in the spring of 2020 has significantly revalued risk exposures in the business environment, which required new approaches in the measurement of financial risks. This paper defines and explains a new approach to the measurement of liquidity risk in companies in a time of an economic crisis. This approach is more responsive to stressful circumstances in the business environment and measures the time in an economic crisis when a company can still pay maturing liabilities out of its own inventory of liquid assets, where sales of a company on the market are limited or completely prohibited, as this was the case for some industries during the first wave of Covid -19 in spring 2020. The objective of this paper was to define a new metric for the measurement of corporate liquidity, which is sensitive to this environment and shows the propensity of a company to the risk of illiquidity if an economic crisis appears. This paper, in the next step, leverages the newly defined metric of corporate liquidity and calculates the average liquidity of all companies, as well as the average liquidity by business sectors in the Serbian economy, to discuss corporate liquidity in a crisis. The results show that the average liquidity of the Serbian economy in crisis at the end of 3Q 2020 was 78,02 days, i.e., the average company in the Serbian economy was able to survive 78,02 days in stress by the end of 3Q 2020 if its sales on the market were prohibited. Implications for Central European audience:The model in this paper is in the interest of every company and bank to measure the liquidity risk of business partners in times of an economic crisis and to predict which business partners may have liquidity problems in crisis and may therefore not be able to pay their open liabilities. The contribution of this paper to liquidity risk measurement in companies in times of stress is high as the currently available literature does not offer an alternative approach.

show abstract

“…During the Covid-19 pandemic, firms' financing needs related to bank loans and credit lines have sharply increased. It is established evidence that firms were running into a liquidity crisis after the shock related to the confinement measures on their economic activity and the intervention of public authorities tended to reduce their financing gap(Demmou et al, 2021). But the impact of the public intervention took some time as only a small net percentage of firms indicated improvements in the access across most financing instruments, relative to pre-Covid-19 levels.…”

mentioning

confidence: 99%

Firms’ financing conditions before and after the COVID-19 pandemic: a survey-based analysis

Ferrando,

Rariga

2024

J. Ind. Bus. Econ.

View full text Add to dashboard Cite

In the paper we analyze how the economic situation and financing conditions of euro area firms have changed along different crises that hit the euro area in the 10 years with a focus on the changes before and after the Covid-19 pandemic. We use the responses of a large sample of euro area firms to a qualitative business survey run on behalf of the European Central Bank / European Commission (Survey on the access to finance of enterprises -SAFE) since 2009. Thus, all the analysis centers around firms' reported perceptions. We describe how during the Covid-19 crisis, and despite generally accommodative financing conditions and state aid measures, turnover and profits of firms decreased sharply, having a dampening impact on firms' employment and investment. As a result, firms' financial vulnerability peaked during the Covid-19 crisis which consequences for the subsequent periods. From the financing side, around the Covid-19 period, firms were signaling some deterioration in their access to finance as it is the case more recently due to the pass-through of increasing policy rates to the overall corporate financing conditions. We document that a deterioration in financing conditions does have an impact on both firm-specific and aggregate growth. Based on firms' perceptions only, we find a link between real decisions of firms (in terms of investment and employment), macroeconomic developments and some key survey-based indicators of financing conditions.

show abstract

Liquidity shortfalls during the COVID-19 outbreak: Assessment and policy responses

Abstract: OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s).

Cited by 14 publications

References 3 publications

Liquidity Shortfalls during the COVID-19 Outbreak: Assessment and Policy Responses

Liquidity Shortfalls during the COVID-19 Outbreak: Assessment and Policy Responses

Corporate Liquidity in Coronacrisis: Experience of Serbian Economy

Firms’ financing conditions before and after the COVID-19 pandemic: a survey-based analysis

Contact Info

Product

Resources

About