Working capital and firm performance: role of COVID-19 disruption

PurposeThis study examines the performance effect of working capital for a large sample of Indian manufacturing firms in light of supply chain disruption, i.e. the COVID-19 pandemic.Design/methodology/approachThis study is based on secondary data collected from the Prowess database on Indian manufacturing firms listed on the Bombay Stock Exchange (BSE) 500. Panel data regression analyses are used to estimate all models. Moreover, this study has employed robust standard errors to consider for heteroscedasticity concerns.FindingsThe results challenge the current notion of working capital investment and reveal that higher working capital has a positive and significant impact on firm performance. Further, it highlights that Indian manufacturing firms suffered financially post-COVID-19 as they significantly lack the working capital to run day-to-day operations.Originality/valueThis research contributes to the scant literature by examining the association between working capital financing and firm performance in light of the COVID-19 pandemic, representing typical developing economies like India.

Suicidal behavior among inpatients with severe mental conditions in a public mental health hospital in Uganda.

BACKGROUND: Suicidal behaviors are prevalent among inpatients with severe mental conditions and may result in many dying by suicide. Few studies have focused on the burden of suicidal behaviors among these inpatients in low-income settings, despite suicide being consistently higher in lower-income countries such as Uganda. This study, therefore, provides the prevalence and associated factors of suicidal behaviors and suicide attempts among inpatients with severe mental conditions in Uganda. METHOD: This was a retrospective chart review of all individuals admitted with severe mental conditions to a large psychiatry inpatient unit in Uganda for four years (2018-2021). Two separate logistic regressions were conducted to determine the factors associated with suicidal behaviors or suicidal attempts among the admitted individuals. RESULTS: The prevalence of suicidal behavior and suicidal attempts among 3104 (mean age = 33, Standard deviation [SD] = 14.0; 56% were males) were 6.12% and 3.45%, respectively. Having a diagnosis of depression increased the likelihood of both suicidal behaviors (adjusted odds ratio [aOR]: 5.36; 95% confidence interval [CI]: 2.14-13.37; p =0.001) and attempts (aOR: 10.73; 95% CI: 3.44-33.50; p < 0.001). However, a diagnosis of substance-related disorder increased the likelihood of having attempted suicide (aOR: 4.14; 95% CI: 1.21-14.15; p = 0.023). The likelihood of having suicidal behavior decreased as one increased in age (aOR: 0.97; 95% CI: 0.94-0.99; p = 0.006) and increased among individuals reporting stress from financial constraints (aOR: 2.26; 95% CI: 1.05-4.86; p = 0.036). CONCLUSION: Suicidal behaviors are common among inpatients managed for severe mental health conditions in Uganda, especially those with substance use and depressive disorders. In addition, financial stressors are a main predictor in this low-income country. Therefore, regular screening for suicide behaviors is warranted, especially among individuals with depression, and substance use, among those who are young, and among those reporting financial constraints/stress.

Uncertainty in firm innovation scheme and impact of green fiscal policy, Economic recovery of Chinese firms in the post-Covid-19 era

With the Covid-19 outbreak, changing prices of natural resource raw materials are driving up industrial costs, limiting output, and jeopardising economic growth. To encourage the revival of the green economy, fiscal and budgetary policies must focus on fostering innovation and growth. This essay investigates the incentives and mechanics of innovation as a recovery strategy by looking at the impact of tiny tax cuts on energy. Using quarterly data from listed Chinese firms from Q1 2019 to Q2 2021, estimate and draw numerous conclusions using a variance-variance technique. To begin with, innovation is a means of regaining and expanding market share, and tax incentives to enhance energy efficiency may be extremely beneficial to a company's inventive efforts. Second, our findings suggest that tax incentives for energy efficiency encourage businesses to invest in innovation by alleviating financial constraints. Finally, corporations may cut financial expenditures and internal cash flow by sponsoring creative activities. The findings have significant policy implications, since they show that successful eco-design fiscal policies might be part of a post-Covid-19 recovery business transformation programme.

Financial Constraints and Their Impact on University Students of Different Nationalities in the United Arab Emirates

Financial constraints caused by the economic slowdown in 2020 and COVID-19 that followed, affecting the student motivation for academic achievements, are of strategic importance to the global higher education (HE) sectors. This study aims to examine the effects of financial constraints on the motivation and academic performance of students of different nationalities in the United Arab Emirates (UAE) during the pandemic. This study will help us recognize the challenges among students from different backgrounds and nationalities and develop remedial strategies with a global perspective. We used a Likert scale-based questionnaire to collect data on motivation level, and associated variables from a sample of 371 students enrolled in different colleges in the UAE. Statistical techniques such as t-test, F-test, and chi-square test were used to explore the relationship between the variables in the data. The findings of the study revealed that financial constraints during the pandemic did not significantly affect academic motivation, regardless of gender, nationality, and age. The participants expressed that they were prepared and aware of the sunk costs involved in education. However, as the financial impact of the pandemic extended beyond 2020, unemployment increased, and parents were less prepared to bear their children's education costs. This inevitably increased the responsibilities of the universities to provide financial support to deserving students. © 2023, Association for Social Studies Educa. All rights reserved.

Working capital management, financial constraints and exports: evidence from European and US manufacturers.

This paper investigates the effect of firms' working capital management, measured by the cash conversion cycle (CCC) on exports, on both the intensive and extensive margins. By using Heckman's two-stage model for the treatment of sample selection bias, we find that the longer the CCC, the lower firms' likelihood of exporting and the lower the volume of their exports. This phenomenon is economically more relevant for financially constrained firms than for unconstrained firms. The results are robust to the propensity score matching, the transition sample and the placebo analyses. Finally, these results can be extrapolated in the context of the COVID-19 crisis because of the decline in trading conditions and firms' shortage of liquidity.

How Does Firm ESG Performance Impact Financial Constraints? An Experimental Exploration of the COVID-19 Pandemic.

This research assesses the effects of COVID-19-associated shocks on financial constraints and sustainable development goal (SDG) performance to shed light on the impact of SDGs on economic recovery. We construct a large sample of Chinese listed firms from quarterly firm-level accounting data from the China Stock Market & Accounting Research Database for the period 2019Q1-2021Q1, matched with environmental, social, and governance (ESG) scores, SDG performance from the WIND Database, and complemented with data on cumulative and new cases of COVID-19 from the World Health Organization. We use difference-in-differences to investigate any causal effect from COVID-19. We find that COVID-19 induces financial constraints in firms. Further, differing from the existing literature on the determinants of SDGs, we explore the supportive role of SDG performance on firm financial performance and show that ESG can better describe SDG performance and alleviate financial constraints. Moreover, both internal and external financial intermediaries improve with enhanced ESG performance in overcoming financial constraints. Our findings strongly indicate that a sustainable development strategy facilitates efficient adaptation to financial challenges and assists in overcoming external shocks.

Cette étude évalue les effets des chocs associés à la COVID-19 sur les contraintes financières et la performance des objectifs de développement durable (ODD) pour mettre en lumière l'impact des ODD sur la reprise économique. Nous rassemblons un large échantillon d'entreprises chinoises cotées en Bourse à partir de données comptables trimestrielles émanant de la base de données de recherche sur la comptabilité et sur le marché boursier chinois, du premier trimestre 2019 au premier trimestre 2021. Ces données sont appariées avec des critères environnementaux, sociaux et de gouvernance (ESG), avec la performance des ODD tirée de la base de données WIND, et sont complétées par des données issues de l'Organisation mondiale de la santé sur le nombre de cas cumulatifs et de nouveaux cas de COVID-19. Nous utilisons la méthode des différences de différences pour étudier l'effet de causalité lié à la COVID-19. Nous constatons que la COVID-19 provoque des contraintes financières au sein des entreprises. De plus, contrairement à ce qui est réalisé dans la littérature existante sur les déterminants des ODD, nous explorons le rôle d'appui que jouent les bons résultats des ODD sur la performance financière des entreprises et montrons que les critères ESG permettent de décrire de façon plus adéquate les résultats des ODD et d'alléger les contraintes financières. De plus, les intermédiaires financiers à la fois internes et externes, grâce à de meilleures performances des critères ESG, sont en gré d'améliorer leur réponse aux contraintes financières. Nos résultats fournissent des donnéees probantes selon lesquelles une stratégie de développement durable facilite une adaptation efficiente aux défis financiers et aide à surmonter les chocs externes.

How does the COVID-19 affect earnings management: Empirical evidence from China.

Using China's A-share listed companies from 2018 to 2020, this paper examines the impact of COVID-19 on earnings management. The results reveal that: (1) The COVID-19 shock intensifies earnings management, which is reflected in the increasing accrual-based earnings management and real earnings management. Moreover, when enterprises face a higher degree of financial constraints, this shock effect is more evident. (2) Enterprises in industries and regions where COVID-19 is more severe are more affected by the suspension of work and production caused by the epidemic prevention policies, so these enterprises choose accrual-based earnings management through accounting items rather than carrying out earnings management through real activities. (3) Further analysis finds that, enterprises with more investment opportunities have more evident earnings management caused by the COVID-19 shock. However, high-quality auditing has an inhibitory effect on accrual-based earnings management caused by the COVID-19 shock but has no inhibitory effect on real earnings management.

Slack Resources, Corporate Performance, and COVID-19 Pandemic: Evidence from China.

COVID-19 has caused tremendous damage to global economies, and similar health crises are expected to happen again. This study tests whether slack resources would enable companies to prepare for such uncertainties. Specifically, we explored the influence of the COVID-19 patient occurrence on corporate financial performance and the buffering effect of financial slacks using Chinese listed companies' data during 2021. We also examined whether this effect differs across firms' financial health and industry. Test results are as follows. First, consistent with the recent studies on pandemics, the degree of COVID-19 prevalence had a negative impact on the Chinese company's financial performance, and slack resources offset this adverse effect. Second, slack's buffering effects appeared mostly in financially constrained companies. Third, such effects mostly appeared in industries vulnerable to the COVID-19 shock. In the business environment of 2021, adapted to COVID-19, our main test result seems to mainly come from companies with a greater need for slack. Our tests imply that, despite differences in the degree of accessibility to resources, excess resources help companies overcome the COVID-19 crisis, which means that firms can more efficiently respond to economic shocks such as COVID-19 if they reserve past profits as free resources. This study contributes to the literature in that there is limited research on the slack resources' buffering effect on the COVID-19 shock and that this study works as a robustness test as it uses data from one of the East Asian regions at a time when the control of COVID-19 was relatively consistent and successful, which can limit the effect of COVID-19 and slacks.

Small firms amidst COVID-19: Financial constraints and role of government support

The coronavirus disease 2019 has severely affected the financially constrained small and medium enterprises (SMEs). In response, various countries employed several policies to support SMEs. Using rich firm-level data from 34 countries, we study the impact of the pandemic-led crisis on cash-strapped SMEs and the role of governments in offsetting losses. Our results suggest that (i) government support programmes target mostly financially constrained firms;(ii) firms adjustments to the pandemic are associated with the likelihood of government support;(iii) financially constrained firms are more likely to lay off workers;and (iv) financially constrained firms layoff more male employees than female employees. © 2022 Banca Monte dei Paschi di Siena SpA.

Excess cash holding and audit pricing: a further consideration of precautionary motives and other factors

Purpose This paper aims to investigate auditors' pricing of excess cash holdings and the variation in their pricing decisions in light of the precautionary motives of cash holdings and certain firm-specific conditions and during periods of crisis. Design/methodology/approach The authors conduct the two-stage-least-squares multivariate analysis using a sample of publicly listed non-financial US firms for the period 2003 to 2021 (42,413 firm-year observations). Findings The findings show a significant positive relationship between excess cash and audit fee. Next, the authors find that audit pricing of excess cash is significantly higher for firms with lower financial constraints. However, the authors do not find evidence to suggest that auditors price excess cash significantly higher for firms with lower hedging needs. In additional analysis, the authors find evidence to suggest that auditors charge significantly less for excess cash in firms that report financial loss and firms operating in industries with high litigation risk. The additional analysis also reveals excess cash is not positively and significantly priced by auditors as a result of the global financial crisis and Covid-19 pandemic. Originality/value Most researchers have analyzed excess cash holding from the perspective of managers, i.e. agency conflict or managerial prudence, while somewhat neglecting auditors' perception of the embedded risk of excess cash holdings. The authors provide new insights on auditors' perspective of excess cash holding and identify certain factors/situation/conditions that cause variation in the audit fee premium. The findings offer useful insights for managers and shareholders who are interested in assessing the effects of excess cash holdings policies on the audit fee premium.

Corporate social performance and firm debt levels: Impacts of the covid-19 pandemic and institutional environments.

This paper examines the relation between corporate social performance (CSP) and firm debt levels and explores the channels between them by focusing on the ongoing health crisis, the COVID-19 pandemic. We use a large sample of public firms from 31 countries between 2002 and 2020. Employing pooled ordinary least squared and firm fixed effects models, after controlling for endogeneity and sample selection bias, we find that during the pre-COVID economic condition, CSP has a significantly positive impact on firm debt levels by reducing financial constraints and enhancing stakeholder engagement. However, during the outbreak, CSP becomes costlier and reveals more managerial agency problems for firms that make such associations attenuated. Furthermore, our evidence suggests that in countries with better institutional environments, the CSP-firm debt levels relation is less pronounced. These results have several implications in terms of investment and capital structure decisions.

Disparate Impacts of COVID-19 Disruptions for California College Students

This paper documents the experience of California college students in the midst of the pandemic as their academic and home lives were disrupted. The analysis relies on a survey sent to all financial aid applicants statewide. Survey respondents include nearly 100,000 students enrolled in both two-year and four-year postsecondary institutions. Results reveal multiple stressors strained the educational experience and trajectories of many students. These stressors were not evenly distributed. In particular, students from low-income backgrounds were more likely to face increased financial stress, additional home responsibilities, and difficulty accessing the online learning environment, when compared to their higher-income peers.

AI-powered Digital Classroom

India is one of the countries with the highest number of young students enrolling for higher studies. Education plays a vital role in the life of students about career advancement. In the COVID pandemic situation, many youngsters feel restless and dissatisfied due to syllabus incompletion. So many academies are offering online courses but because of improper facilities or sources and financial constraints. We aim at introducing Artificial Intelligence (AI)-powered E-learning methods to students who can dynamically interact with the faculty and peers and clarify their queries while studying. In addition, we aim at personalizing education which helps in assessing students' skills/talents and evaluating their performance. EDUBOT is a student friendly AI-powered chatbot and the Learning Management System (LMS) that provides students with the resources they need on any topic the need and solves their problems. The features provided by this product are dynamic front-end, Interactive Query Search, Personalized Student centric Assessment and Super User. © 2022 IEEE.

The Effect of the Supply Chain Finance on Trading Enterprises and the Promotion of Financial Information System

COVID-19 has a significant impact on the global supply chain, and enterprises involved in international trade may face more uncertainties. Financing constraints restrict the development of trading enterprises, while supply chain finance can help trading enterprises obtain more funds and reduce the risks in trade. This paper uses the data of trading enterprises from 2011 to 2020 and adopts cash-cash flow sensitivity model to study the relationship between supply chain finance and enterprise financing constraints. The results show that supply chain finance can significantly alleviate the financing constraints and reduce the cash-cash flow sensitivity of trading enterprises. In addition, this paper also puts forward suggestions from aspects of the government, financial markets and enterprises to promote the application of the information system of supply chain finance in international trade. © 2021 IEEE.

Can Financial Constraints and Regulatory Distance Reduce Corporate Environmental Irresponsibility?

As global environmental problems become increasingly severe, corporate social (environmental) responsibility has become a hot topic in research, but there is still a lack of clear understanding of corporate environmental irresponsibility behavior and the driving factors behind this behavior. Our research aims to reveal the factors affecting corporate environmental irresponsibility from both internal and external perspectives. Inside enterprises, financial constraints will affect the degree of capital adequacy and thus affect the environmental behavior of enterprises. Externally, the fulfillment of corporate environmental responsibility will be affected by external regulatory pressure. Taking 399 A-share listed companies in China’s heavily polluting industries as the research objects, this paper empirically analyzes the influence paths and internal mechanisms of financial constraints and regulatory distance on corporate environmental irresponsibility, and it further divides regulatory distance into physical regulatory distance and power regulatory distance. This paper’s findings show that both financial constraints and physical regulatory distance were positively correlated with corporate environmental irresponsibility in China, and that the positive correlation between physical regulatory distance and corporate environmental irresponsibility was more significant in non-state-owned enterprises. In addition, financial constraints and regulatory distance have a complementary effect on corporate environmental irresponsibility. These findings can reduce the environmental risks posed by enterprises and help them to avoid environmental irresponsibility.

Financing constraints and firm-level responses to the COVID-19 pandemic: International evidence.

We explore whether financing constraints affected the ways in which small and medium-sized enterprises navigated through the economic disruptions caused by the COVID-19 pandemic. We draw on data from a novel source, the COVID-19 Impact Follow-up Surveys conducted in 19 countries by the World Bank Enterprise Analysis Unit as a follow-up to enterprise surveys conducted in these countries prior to the COVID-19 outbreak. We find that previous bank-lending credit constraints magnified the effects of the pandemic. More specifically, credit-rationed firms were more likely to experience greater liquidity and cash flow problems and more likely than unconstrained firms to be delinquent in meeting their obligations to financial institutions during the economic crisis. Furthermore, these firms were less likely to have access to bank funding as a principal source of financing to address pandemic-induced cash flow and liquidity problems during the COVID-19 outbreak. We further find that credit-constrained firms were more likely to use trade credit, delay payments to suppliers or employees, and rely on government grants to cope with pandemic-related liquidity and cash flow problems. We find little evidence that credit-rationed firms were more likely to raise equity capital during this economic crisis. Finally, we find that financing constraints were more likely to hamper firms' ability to adjust business operations in response to exogenous shocks. This study contributes to the literature on the impact of credit constraints on firm behavior in times of crisis.

COVID-19: guaranteed Loans and Zombie Firms.

Based on a survey (7-13 April 2020) we evaluate the reaction of Swiss firms towards the COVID-19 crisis. Firms show little pro-active reactions towards the crisis, but decrease their business activities. The firms in the survey report that the decline in foreign demand is the single most important reason for their deteriorating business situation. Firms that faced a more difficult business situation before the crisis are affected more severely during the crisis. Moreover, we investigate the impact of the Swiss federal loan program (Bundeshilfe) on the business activities. To this end, we develop a stylized theoretical model of financially constrained heterogeneous firms. We find that policy makers face a trade-off between immediate higher unemployment rates and long-term higher public spending. The former arises from a combination of a too strong economic impact of the COVID-19 lockdown (demand drop) and too low levels of loans provided. Nevertheless, providing (too) high levels of loans to firms creates zombie firms that are going to default in the future leading to an increase in public spending. (JEL codes: D22, D25, D84, and G33).