Corporate Funding and the COVID-19 Crisis
IMF Working Papers, March 19, 2021
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- Corporate Funding and the COVID-19 Crisis
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Bibliographic details
- Authors: Andrea Deghi, Dulani Seneviratne, Tomohiro Tsuruga, Jerome Vandenbussche
- Published: March 19, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513574158.001
Scope and approach
- Assesses whether corporate liquidity needs in the G7 economies were met during the containment phase of the COVID-19 pandemic (February-June 2020).
- Uses various approaches to identify credit supply shocks.
- Focuses on nonfinancial corporate sector cash flows, liquidity and solvency pressures, and market- and bank-based corporate funding.
Key findings on corporate cash flows and borrowing
- The pandemic crisis adversely affected nonfinancial corporate sector cash flows, generating liquidity and solvency pressures.
- Corporate borrowing surged in March and into the second quarter, driven by credit line drawdowns and unprecedented policy support.
- Residual signs of strain remained as of the end of June.
Market- and instrument-specific outcomes
- United States:
- The bond market was buoyant from the end of March onward.
- Credit supply conditions for bank loans and the syndicated loan market tightened.
- Other G7 economies:
- Credit supply conditions generally eased somewhat across markets during the second quarter.
Firm-level heterogeneity
- Among listed firms, entities with weaker liquidity or solvency positions before the onset of COVID-19 suffered relatively more financial stress in some economies in the early stages of the crisis.
- Smaller firms experienced relatively more financial stress in some economies in the early stages of the crisis.
Policy impacts
- Policy interventions, especially those directly targeting the corporate sector, had a beneficial effect on credit supply overall.
- Unprecedented policy support was an important factor enabling the surge in corporate borrowing in March and into the second quarter.
Source: Corporate Funding and the COVID-19 Crisis — IMF Working Paper (February-June 2020), https://www.imf.org/en/publications/wp/issues/2021/03/19/corporate-funding-and-the-covid-19-crisis-50267
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