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The COVID-19 Shock and Equity Shortfall: Firm-level Evidence from Italy

Author

Listed:
  • Elena Carletti

    (Università Bocconi and CEPR)

  • Tommaso Oliviero

    (Università di Napoli Federico II and CSEF)

  • Marco Pagano

    (Università di Napoli Federico II, CSEF and EEIF)

  • Loriana Pelizzon

    (SAFE, Goethe University Frankfurt and Università di Venezia Ca' Foscari)

  • Marti G. Subrahmanyam

    (Stern School of Business, New York University)

Abstract

We forecast the drop in profits and the equity shortfall triggered by the COVID-19 lockdown, using a representative sample of 80,972 Italian firms. A 3-month lockdown entails an aggregate yearly drop in profits of about 10% of GDP and results in financial distress for 17% of the sample firms, employing 8.8% of the sample employees. Distress is more frequent for small and medium-sized enterprises, for firms with high pre-COVID-19 leverage, and those belonging to the Manufacturing and Wholesale Trading sectors. Listed companies are less likely to enter distress, while there is no clear correlation between distress rates and family firm ownership.

Suggested Citation

  • Elena Carletti & Tommaso Oliviero & Marco Pagano & Loriana Pelizzon & Marti G. Subrahmanyam, 2020. "The COVID-19 Shock and Equity Shortfall: Firm-level Evidence from Italy," CSEF Working Papers 566, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 20 Jul 2020.
    • Handle: RePEc:sef:csefwp:566
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    COVID-19; pandemics; losses; distress; equity; recapitalization.;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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