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

Corporate Liquidity and Solvency in Europe during COVID-19: The Role of Policies
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Volume/Issue: Volume 2021 Issue 056
Publication date: March 2021
ISBN: 9781513570914
$18.00
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Topics covered in this book

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Finance , corporate vulnerability , solvency risk , liquidity risk , policy effectiveness , WP , cash flow , illiquid firm , firm level , management action , insolvent firm , liquidity deficit

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).