Effect of Coronavirus Crisis on the Liquidity and Capital Structure of the Banking Sector in Egypt: A Professional Accounting Perspective

Abstract

Coronavirus pandemic has its significant and severe effects on the operations of different businesses all over the world and consequently on the banking sector, which is of great importance and represents an important source of credit to individuals and corporations. The objective of this paper is to investigate the impact of coronavirus pandemic on the liquidity, as measured by cash flows from operations and the capital structure, as measured by the leverage level, of the banks listed on the Egyptian Stock Exchange (EGX). Based on a sample of 9 listed banks on EGX during the period 2019-2020, the author found no significant effect of coronavirus pandemic on the liquidity of the banks listed on EGX. However, statistical results showed that coronavirus pandemic has a significant effect on the capital structure of the listed banks. Research results imply that the strategies set by the Central Bank of Egypt (CBE) and followed by the listed banks are highly effective in absorbing the negative impact of coronavirus pandemic on the banking industry. Based on these findings, the author recommends more research to be conducted to investigate the impact of coronavirus pandemic on other aspects related to the banking industry; such as profitability and market value.