Is ESG the key to unlock debt financing during the COVID-19 pandemic? International evidence.

In this article, we examine whether stakeholder engagement impacts firms' ability to raise debt during the COVID-19 pandemic. Using firm-level data from 51 countries, we find that firms with greater stakeholder engagement obtain higher debt financing during the COVID-19 pandemic. This effect is more pronounced for riskier firms, highlighting the importance of maintaining relationships with stakeholders. Moreover, we find that stakeholder engagement facilitates higher debt financing for less asset-intensive firms and firms in emerging economies. Our empirical analysis reinforces the role of firms' stakeholder engagement in mitigating the adverse impact of economic shocks.

COVID-19 pandemic and debt financing by firms: Unravelling the channels.

The COVID-19-induced disruptions and the consequent government responses stretched the financial resources of firms. Recent studies document an increase in debt financing by firms during the pandemic. Using firm-level data from 61 countries, we deepen the understanding of the impact of the pandemic by examining the variation in loan and bond financing attributable to COVID-19-specific factors. Indicative of heightened precautionary needs, firms with higher pandemic exposure and those located in countries with stringent lockdowns have a higher propensity to raise debt. Furthermore, firms in industries less amenable to remote working also have a higher propensity to raise debt, but face higher financing costs compared to their peers. Reflective of opportunistic investment motives, firms that hold a relatively positive outlook have a greater likelihood of raising loan financing. The findings draw attention to the role of real-side factors and managerial motives that drive debt financing during a distress episode.

Impact of operational fragility on stock returns: Lessons from COVID-19 crisis

We examine how the market valuation of firms varies on account of their operational fragility that makes them vulnerable to the COVID-19 pandemic. Using the data on plant location that uniquely identifies the vulnerability of firms to operational disruptions, we find that firms with plants located in zones susceptible to higher infections earn significantly lower returns. For firms with high operational fragility, the marginal value of financial flexibility and operating flexibility is higher. The adverse impact of the operational fragility is lower for firms affiliated with the larger business groups. The paper identifies unique channels associated with the pandemic that impact firm value.