Reacting to the economic fallout of the COVID-19: Evidence on debt exposure and asset management of Italian firms

Abstract

The COVID-19 pandemic provides a once-in-a-lifetime opportunity to learn more about how businesses are affected by and adapt to large-scale, unforeseen shocks. Our research examines the worries of a sample of Italian publicly traded companies about the spread of COVID-19. The information was gathered from a dataset employing text-based estimates of the main concerns listed companies have about the development of COVID-19 and other pandemic diseases. These data can be used to determine whether companies stand to earn or lose money because of a particular outbreak. We concentrate on the data for Italy, which allows us to quantify which of the sample’s Italian enterprises are more exposed and thus affected, the severity of risk perception, and the firm’s attitude towards​ the shock exposure. We attempt to explain how firm perceptions of the COVID-19 crisis are correlated with various types of indicators related to economic and financial status, such as financial position (total debt exposure and short-term exposure), ROI, and ROE during the COVID-19 crisis, i.e. the main firms’ responses to such a large shock.