How Valuable Is Financial Flexibility when Revenue Stops? Evidence from the COVID-19 Crisis

• 成果类型: Article
• 署名作者: Fahlenbrach, Rudiger; Rageth, Kevin; Stulz, Rene M.
• 署名单位: Swiss Federal Institutes of Technology Domain; Ecole Polytechnique Federale de Lausanne; Swiss Finance Institute (SFI); European Corporate Governance Institute; University System of Ohio; Ohio State University; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa134
• 发表日期: 2021
• 页码: 5474
• 关键词: corporate-finance; AGENCY COSTS; cash flow; constraints; RISK; FIRMS; debt

摘要

Firms with greater financial flexibility should be better able to fund a revenue shortfall resulting from the COVID-19 shock and benefit less from policy responses. We find that firms with high financial flexibility within an industry experience a stock price drop that is 26%, or 9.7 percentage points, lower than those with low financial flexibility. This differential return persists as stock prices rebound. Firms more exposed to the COVID-19 shock benefit more from cash holdings. No evidence suggests that recent payouts worsened the average firm's drop in stock price. Our results cannot be explained by a leverage effect.