Implications of the COVID-19 Disruption for Corporate Leverage

Sungmin An, Anna Kovner and Stephan Luck

No 20200810, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The COVID-19 pandemic has caused significant economic disruptions among U.S. corporations. In this post, we study the preliminary impact of these disruptions on the cash flow and leverage of public U.S. corporations using public filings through April 2020. We find that the pandemic had a negative impact on cash flow while also reducing corporations’ interest expenses. However, the cash flow shock far outpaced the benefits of lower interest payments, especially in industries that were disproportionately levered. Looking ahead, we find that a sizable share of U.S. corporations have interest expense greater than cash flow, raising concerns about the ability of those corporations to endure further liquidity shocks.

Keywords: COVID-19; bank leverage; corporate debt (search for similar items in EconPapers)
JEL-codes: G24 I18 (search for similar items in EconPapers)
Date: 2020-08-10
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