This paper analyses the evolution of debt of Italian firms from 2010 to 2020 with special focus on the first year of the Covid-19 pandemic. By means of quantile regressions, our approach investigates several heterogeneities to assess the vulnerabilities of the most fragile firms. We find that, on average, Italian non-financial companies (NFCs) reduced their indebtedness over the sample period, a trend which did not get interrupted during the first year of the pandemic. By exploiting the high heterogeneity in the data, however, we find that the turmoil affected the most indebted firms and the trend of declining indebtedness for these firms was reversed. Moreover, sectors that were suspended ex lege during the first lockdown: i) already had the highest levels of the debt-to-assets ratios over our sample period, and ii) experienced the steepest increase in debt in 2020 relative to the previous year. Finally, our results show that highly indebted firms exhibit a qualitative different behaviour compared to the rest of the sample and that excessively piling up debt severely increases the likelihood of exiting the market.

Fattouh, P., Pisicoli, B., Scaramozzino, P. (2023). Debt and Financial Fragility: Italian Non-Financial Companies after the Pandemic [Working paper].

Debt and Financial Fragility: Italian Non-Financial Companies after the Pandemic

Scaramozzino P
Membro del Collaboration Group
2023-02-01

Abstract

This paper analyses the evolution of debt of Italian firms from 2010 to 2020 with special focus on the first year of the Covid-19 pandemic. By means of quantile regressions, our approach investigates several heterogeneities to assess the vulnerabilities of the most fragile firms. We find that, on average, Italian non-financial companies (NFCs) reduced their indebtedness over the sample period, a trend which did not get interrupted during the first year of the pandemic. By exploiting the high heterogeneity in the data, however, we find that the turmoil affected the most indebted firms and the trend of declining indebtedness for these firms was reversed. Moreover, sectors that were suspended ex lege during the first lockdown: i) already had the highest levels of the debt-to-assets ratios over our sample period, and ii) experienced the steepest increase in debt in 2020 relative to the previous year. Finally, our results show that highly indebted firms exhibit a qualitative different behaviour compared to the rest of the sample and that excessively piling up debt severely increases the likelihood of exiting the market.
Working paper
feb-2023
CEIS Working Paper No. 551
Rilevanza internazionale
Settore SECS-P/01 - ECONOMIA POLITICA
English
leverag; corporate debt; debt ratio; quantile regression
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4350715
Fattouh, P., Pisicoli, B., Scaramozzino, P. (2023). Debt and Financial Fragility: Italian Non-Financial Companies after the Pandemic [Working paper].
Fattouh, P; Pisicoli, B; Scaramozzino, P
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/323843
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