Impact of COVID-19 on Corporate Debt Structure: Cross Country Evidence

Abstract

We exploit the quasi-experimental properties of the COVID-19 pandemic to investigate how national culture, trust in government, and response to the pandemic affect corporate borrowing and the structure of financial contracts. Using a cross-country analysis of 57 countries, we find that firms increase their bank and non-bank debt levels. Our findings show that firm-level characteristics such as financial flexibility, default risk, and size, in addition to national culture, government preparedness, and response to the pandemic, are crucial determinants of corporate borrowing.