Outlasting the Pandemic: Corporate Payout and Financing Decisions During COVID-19

58 Pages Posted: 10 Apr 2021 Last revised: 12 Jul 2021

See all articles by Davide Pettenuzzo

Davide Pettenuzzo

Brandeis University - International Business School

Riccardo Sabbatucci

Stockholm School of Economics; Swedish House of Finance

Allan Timmermann

University of California, San Diego (UCSD) - Rady School of Management

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Date Written: July 9, 2021

Abstract

The outbreak of the Covid-19 pandemic massively increased uncertainty about firms’ cash flows and their access to financial markets. We examine its effect on firms’ strategies for preserving cash by suspending dividends and buybacks and raising new funds through bond and equity issues. We identify key firm and stock characteristics that help explain a large portion of the cross-sectional variation in firms’ payout and financing decisions and show that the expansive monetary policies pursued by the Federal Reserve in the early phase of the pandemic crucially affected the timing and sequencing of these decisions.

Keywords: COVID-19 pandemic; dividend suspensions; share repurchases; bond and equity issues; corporate actions; stock market reaction

JEL Classification: G14, G32, G35

Suggested Citation

Pettenuzzo, Davide and Sabbatucci, Riccardo and Timmermann, Allan, Outlasting the Pandemic: Corporate Payout and Financing Decisions During COVID-19 (July 9, 2021). Swedish House of Finance Research Paper No. 21-10, Available at SSRN: https://ssrn.com/abstract=3823258 or http://dx.doi.org/10.2139/ssrn.3823258

Davide Pettenuzzo

Brandeis University - International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States

Riccardo Sabbatucci (Contact Author)

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

Swedish House of Finance

Drottninggatan 98
111 60 Stockholm
Sweden

Allan Timmermann

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

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