Corporate Funding and the COVID-19 Crisis

By Andrea Deghi, Dulani Seneviratne, Tomohiro Tsuruga, Jerome Vandenbussche

March 19, 2021

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Andrea Deghi, Dulani Seneviratne, Tomohiro Tsuruga, and Jerome Vandenbussche. Corporate Funding and the COVID-19 Crisis, (USA: International Monetary Fund, 2021) accessed November 21, 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

This paper assesses whether corporate liquidity needs in the G7 economies were met during the containment phase of the COVID-19 pandemic (February-June 2020) using various approaches to identify credit supply shocks. The pandemic crisis adversely affected nonfinancial corporate sector cash flows, generating liquidity and solvency pressures. However, corporate borrowing surged in March and into the second quarter, thanks to credit line drawdowns and unprecedented policy support. In the United States, the bond market was buoyant from the end of March onward, but credit supply conditions for bank loans and the syndicated loan market tightened. In other G7 economies, credit supply conditions generally eased somewhat across markets during the second quarter. Among listed firms, entities with weaker liquidity or solvency positions before the onset of COVID-19, as well as smaller firms, suffered relatively more financial stress in some economies in the early stages of the crisis. Residual signs of strain remained as of the end of June. Policy interventions, especially those directly targeting the corporate sector, had a beneficial effect on credit supply overall.

Subject: Bank credit, Bonds, Corporate bonds, Credit, Currencies, Economic sectors, Financial crises, Financial institutions, Financial markets, Money, Securities markets, Syndicated loans

Keywords: Bank credit, Bonds, Central bank policies, Commercial paper, Commercial paper Issuance, Corporate bond bond market, Corporate bonds, Corporate cash, Corporate funding, COVID-19, Credit, Credit market, Credit supply, Credit supply condition, Currencies, Economic crisis, Europe, Financial constraints, Firm liquidity vulnerability, Global, Government liquidity support, Group of Seven economies, Group of Seven economy, High-liquidity-gap firm, Loan guarantees, Pandemic crisis, Securities markets, Solvency pressure, Supply condition, Syndicated loan market, Syndicated loans

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/086
Stock No:

WPIEA2021086
ISBN:

9781513574158
ISSN:

1018-5941

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