Corporate Liquidity and Solvency in Europe during COVID-19: The Role of Policies

By Christian H Ebeke, Nemanja Jovanovic, Laura Valderrama, Jing Zhou

March 2, 2021

Preview Citation

Format: Chicago

Christian H Ebeke, Nemanja Jovanovic, Laura Valderrama, and Jing Zhou. Corporate Liquidity and Solvency in Europe during COVID-19: The Role of Policies, (USA: International Monetary Fund, 2021) accessed November 16, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The spread of COVID-19, containment measures, and general uncertainty led to a sharp reduction in activity in the first half of 2020. Europe was hit particularly hard—the economic contraction in 2020 is estimated to have been among the largest in the world—with potentially severe repercussions on its nonfinancial corporations. A wave of corporate bankruptcies would generate mass unemployment, and a loss of productive capacity and firm-specific human capital. With many SMEs in Europe relying primarily on the banking sector for external finance, stress in the corporate sector could easily translate into pressures in the banking system (Aiyar et al., forthcoming).

Subject: COVID-19, Liquidity, Loans, Solvency, Stocks

Keywords: Cash flow, Corporate vulnerability, Firm level, Illiquid firm, Insolvent firm, Liquidity deficit, Liquidity risk, Management action, Policy effectiveness, Solvency risk, WP

Publication Details

Pages:

48
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/056
Stock No:

WPIEA2021056
ISBN:

9781513570914
ISSN:

1018-5941

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