The COVID-19 Shock and Equity Shortfall: Firm-Level Evidence from Italy

34 Pages Posted: 13 Aug 2020 Last revised: 10 Sep 2020

See all articles by Elena Carletti

Elena Carletti

Bocconi University - Department of Finance; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Tommaso Oliviero

University of Naples Federico II - Department of Economic and Statistical Sciences; CSEF; CefES; MoFiR

Marco Pagano

University of Naples Federico II - Department of Economics and Statistics; Centre for Studies in Economics and Finance (CSEF); Einaudi Institute for Economics and Finance (EIEF); Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE; Ca Foscari University of Venice

Marti G. Subrahmanyam

New York University (NYU) - Department of Finance

Date Written: July 27, 2020

Abstract

We employ a representative sample of 80,972 Italian firms to forecast the drop in profits and the equity shortfall triggered by the COVID-19 lockdown. A 3-month lockdown generates an aggregate yearly drop in profits of about 10% of GDP, and 17% of sample firms, which employ 8.8% of the sample’s employees, become financially distressed. Distress is more frequent for small and medium-sized enterprises, for firms with high pre-COVID-19 leverage, and for firms belonging to the Manufacturing and Wholesale Trading sectors. Listed companies are less likely to enter distress, whereas the correlation between distress rates and family firm ownership is unclear.

Keywords: COVID-19, pandemics, losses, distress, equity, recapitalization

JEL Classification: G01, G32, G33

Suggested Citation

Carletti, Elena and Oliviero, Tommaso and Pagano, Marco and Pelizzon, Loriana and Subrahmanyam, Marti G., The COVID-19 Shock and Equity Shortfall: Firm-Level Evidence from Italy (July 27, 2020). SAFE Working Paper No. 285, 2020, NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3671396

Elena Carletti

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Tommaso Oliviero

University of Naples Federico II - Department of Economic and Statistical Sciences ( email )

Via Cintia 26
Napoli
Italy

CSEF ( email )

Via Cintia
Complesso Monte S. Angelo
Napoli, Naples 80126
Italy

CefES ( email )

U6 Building
Viale Piero e Alberto Pirelli, 22
Milano, 20126
Italy

MoFiR ( email )

Piazzale Martelli, 8
Ancona, 60100
Italy

Marco Pagano

University of Naples Federico II - Department of Economics and Statistics ( email )

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy
+39 081 675306 (Phone)
+39 081 7663540 (Fax)

Centre for Studies in Economics and Finance (CSEF) ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

Einaudi Institute for Economics and Finance (EIEF)

Via Sallustiana, 62
Rome, 00187
Italy

Research Institute of Industrial Economics (IFN)

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

Loriana Pelizzon (Contact Author)

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.safe-frankfurt.de

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

Marti G. Subrahmanyam

New York University (NYU) - Department of Finance ( email )

Stern School of Business,
44 West 4th Street, Suite 9-68
New York, NY 10012-1126
United States
212-998-0348 (Phone)
212-995-4233 (Fax)

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