Citation

Discussion Paper Details

Please find the details for DP15073 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: The risk of being a fallen angel and the corporate dash for cash in the midst of COVID

Author(s): Viral V. Acharya and Sascha Steffen

Publication Date: July 2020

Keyword(s): Bank lines of credit, cash holdings, liquidity, liquidity risk and Pandemic

Programme Area(s): Financial Economics

Abstract: Data on firm-loan-level daily credit line drawdowns in the United States reveals a corporate "dash for cash" induced by COVID-19. In the first phase of extreme precaution and heightened aggregate risk, all firms drew down bank credit lines and raised cash levels. In the second phase following the adoption of stabilization policies, only the highest-rated firms switched to capital markets to raise cash. Consistent with the risk of becoming a fallen angel, the lowest-quality BBB-rated firms behaved more similarly to non-investment grade firms. The observed corporate behavior reveals the significant impact of credit risk on corporate cash holdings.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15073

Bibliographic Reference

Acharya, V and Steffen, S. 2020. 'The risk of being a fallen angel and the corporate dash for cash in the midst of COVID'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15073