Preprint
The Role of External Capital in Funding Cash Flow Shocks: Evidence From the COVID-19 Pandemic
SSRN
2022
Abstract
Using a novel measure of firms’ expected revenue shortfall at the onset of the pandemic, we study the cross sectional differences in how firms fund cash flow shortfalls. We document a U-shaped pattern, where external capital flows to firms with the largest positive and negative expected cash flow shocks. Firms traditionally considered “financially constrained” raise more - not less - capital (relative to assets), on the margin by issuing equity, while unconstrained firms rely on debt markets. Our findings suggest that external equity plays a crucial role as a financing source for smaller, younger, and otherwise riskier firms in times of stress
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Details
- Title
- The Role of External Capital in Funding Cash Flow Shocks
- Creators
- Edith S HotchkissGreg NiniDavid C Smith
- Publisher
- SSRN
- Number of pages
- 1 Online-Ressource (40 p)
- Resource Type
- Preprint
- Language
- English
- Academic Unit
- Finance
- Identifiers
- 991021872799004721