Impact of COVID-19 on Corporate Debt Structure: Cross Country Evidence
48 Pages Posted: 6 Aug 2020
Date Written: August 2, 2020
We examine the impact of the COVID-19 pandemic on firm borrowing behavior across 31 countries. We exploit the quasi-experimental properties of this pandemic to investigate how national culture, government preparedness, and response to the pandemic affect corporate borrowing and the structure of financial contracts. We find that firms increase their levels of bank and non-bank debt. Our findings show that firm-level characteristics such as financial flexibility, default risk, and size, along with national culture, government preparedness, and response to the pandemic are crucial determinants of corporate borrowing.
Keywords: Corporate Debt; Pandemic; National Culture; Financial Contracts
JEL Classification: F3, G15, G20, G28, G3
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