The Risk of Being a Fallen Angel and the Corporate Dash for Cash in the Midst of COVID

There is no author summary for this article yet. Authors can add summaries to their articles on ScienceOpen to make them more accessible to a non-specialist audience.

Abstract

Data on firm-loan-level daily credit line drawdowns in the United States expose a corporate “dash for cash” induced by the COVID-19 pandemic. In the first phase of the crisis, which was characterized by extreme precaution and heightened aggregate risk, all firms drew down bank credit lines and raised cash levels. In the second phase, which followed 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.

Related collections

Author and article information

Contributors

Sascha Steffen

Journal

Journal ID (publisher-id): rcfs

Title: The Review of Corporate Finance Studies

Publisher: Oxford University Press

ISSN (Print): 2046-9128

ISSN (Electronic): 2046-9136

Publication date (Electronic): 31 July 2020

Electronic Location Identifier: cfaa013

Affiliations

[c1 ]Stern School of Business, New York University , CEPR, ECGI, and NBER

[c2 ] Frankfurt School of Finance & Management

Author notes

Send correspondence to Sascha Steffen, s.steffen@ 123456fs.de .

Article

Publisher ID: cfaa013

DOI: 10.1093/rcfs/cfaa013

PMC ID: 7454892

SO-VID: 71fd3a26-8013-4966-9c2c-4f1f7436daa1

Copyright © © The Author(s) 2020. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com.

License:

This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model ( https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)

This article is made available via the PMC Open Access Subset for unrestricted re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the COVID-19 pandemic or until permissions are revoked in writing. Upon expiration of these permissions, PMC is granted a perpetual license to make this article available via PMC and Europe PMC, consistent with existing copyright protections.

History

Page count

Pages: 55

Custom metadata

edited-state accepted-manuscript

article-lifecycle PAP

Keywords: g01,g14,g32,g35

Data availability:

Keywords: g01, g14, g32, g35

Comments

Comment on this article

scite_

Cited by 78

See all cited by