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The Review of Corporate Finance Studies Vol. 9 No. 3 2020

The COVID-19 Shock and Equity Shortfall: Firm-Level Evidence from Italy

Elena Carletti1; Tommaso Oliviero2; Marco Pagano3; Loriana Pelizzon4; Marti G. Subrahmanyam5

1 Bocconi University, Baffi Carefin Centre, IGIER, and CEPR · 2 University of Naples Federico II and CSEF · 3 University of Naples Federico II, CSEF, and EIEF · 4 Leibniz Institute SAFE, Goethe University Frankfurt, and Ca’ Foscari University of Venice · 5 Stern School of Business, New York University and NYU Shanghai

open access

Abstract

We employ a representative sample of 80,972 Italian firms to forecast the drop in profits and the equity shortfall triggered by the COVID-19 lockdown. A 3-month lockdown generates an aggregate yearly drop in profits of about 10% of GDP, and 17% of sample firms, which employ 8.8% of the sample's employees, become financially distressed. Distress is more frequent for small and medium-sized enterprises, for firms with high pre-COVID-19 leverage, and for firms belonging to the Manufacturing and Wholesale Trading sectors. Listed companies are less likely to enter distress, whereas the correlation between distress rates and family firm ownership is unclear.

DOI
10.1093/rcfs/cfaa014
Volume
9
Issue
3
Pages
534-568
Language
en
Sources
openalex bibtex:phds-export.bib crossref

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