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The Covid-19 crisis was different:Assessing the Italian firms in trouble through a new indicator of financial solidity

Author

Listed:
  • Carlo Boselli

    (Italian National Statistical Institute)

  • Stefano Costa

    (Italian National Statistical Institute)

  • Marco Rinaldi

    (Italian National Statistical Institute)

  • Claudio Vicarelli

    (Italian National Statistical Institute)

Abstract
We present a new indicator of economic-financial solidity (EFSI) of Italian firms, considering profitability, solidity and firm liquidity, all evaluated in terms of their sustainability over time. On the basis of EFSI values, we classify firms in four classes, according to their degree of exposure to income and financial risks: Healty, Fragiles, At-risk, Highly at-risk. This indicator shows that in 2011-2020 a tightening process of economic and financial structure took place in the Italian business system, a trend that surprisingly continued also during the pandemic year. To investigate this, we consider the entry of firms into the Highly at-risk class (“downgrades†) in 2019-20. Through a matching technique, we run two counterfactual exercises, estimating at a sector-firm size level what the downgrade rates would have been during the crisis of 2019-20 had the business system had the same economic-financial structure prevailing in 2011 (i.e. at the eve of 2011-12 crisis) or in 2019 (i.e. the last year of economic growth). By this way, we can evaluate whether, and to what extent, the financial support to firms during 2020 contributed to the resilience of the Italian business system. Our results show that, with respect to pre-Covid year, firm aids limited the negative consequences of the pandemic especially on the smaller firms (those more severely hit by the crisis); with respect the 2011-12 crisis, in several sectors support measures more than fully compensate for the negative effects of the pandemic notwithstanding its stronger economic impact on GDP than the previous crisis episode.

Suggested Citation

  • Carlo Boselli & Stefano Costa & Marco Rinaldi & Claudio Vicarelli, 2023. "The Covid-19 crisis was different:Assessing the Italian firms in trouble through a new indicator of financial solidity," Working Papers LuissLab 23159, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    • Handle: RePEc:lui:lleewp:23159
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    More about this item

    Keywords

    Covid-19; Economic-financial solidity; Firm aids; Mahalanobis-metric matching;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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