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How Did COVID-19 Affect Firms? Access to Public Capital Markets?
#MMPMIDC7337854
Halling M
; Yu J
; Zechner J
ä-/-ä 2020[Jul]; ä (ä): ä PMIDC7337854
show ga
We find that bond issues have substantially increased since the onset of the
COVID-19 crisis in calendar week 12 (March 16?20) for bonds rated A or higher,
but surprisingly also for bonds rated BBB or lower. In contrast to existing
evidence on bond maturities in economic downturns, we document that maturities
exceed those of bonds issued before by the same firms as well as the average
maturities during normal times. Determinants of corporate bond spreads
substantially differ between COVID-19 and normal times. Most prominently, asset
tangibility has a highly significant negative effect on spreads during normal
times. During COVID-19, this is reversed, especially in industries heavily
affected by lockdown measures, reflecting the inflexibility associated with fixed
assets. A different picture emerges for equity issues, which slowed considerably
during the first 4 weeks of the pandemic, before accelerating again. Capital
raised during COVID-19 via equity issues is approximately 5% of capital raised
via bond issues.