Impact of COVID-19 on Firm Financing Decision: Evidence From U.S. Public Firms

Abstract

This study examines the impact of COVID-19 on financing decisions of 3,775 U.S. publicly listed firms. The paper studies firm leverage, debt maturity, cash holdings and activity in proactive debt issuance to fund investment or other operational purposes between 2017 and 2021. First, we show a positive impact on firms' leverage when, on average, firms increased their leverage by 3.11 percentage points. Second; the empirical evidence shows a contraction in debt maturity of 1.34 percentage points, measure as long-ter, debt to total debt. Third, firms increase their cash holdings by 1.25 percentage points relative to total assets. Lastly, a significant decrease in instances of proactively raising debt capital observed. The results indicate heterogeneity between firms dependent on firm size and industry classification.