How does COVID-19 affect firms’ short-term financial pressure? Evidence from China

ABSTRACT

In this paper, we investigate how the COVID-19 pandemic affected the short-term financial pressure of listed companies in China. Using a difference-in-difference methodology, we find that firms hit by pandemic shocks suffered significant declines in liquidity levels and increased bankruptcy risk. Non-state-owned enterprises and firms without prior banking relationships suffered more significant liquidity pressure during this crisis than state-owned enterprises and firms with a prior banking relationship.

KEYWORDS:

• COVID-19
• short-term financial pressure
• non-state-owned enterprises
• banking relationship

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [No. 71872014].