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Financial Positions of U.S. Public Corporations: Part 1, Before the Pandemic
This blog is the first in a series that will discuss how the current pandemic affects the financial positions of publicly traded U.S. corporations, the potential implications of these financial developments, and the federal policy response. This first blog discusses the financial positions before the pandemic started. We document three facts: (1) the share of nonfinancial public companies with large amounts of leverage was elevated, suggesting financial fragility; however, (2) interest expenses were small for most firms due to the low level of interest rates; and (3) most firms had ...
Financial Positions of U.S. Public Corporations: Part 2, The Covid-19 Earnings Shock
This blog is the second in a series that discusses how the current pandemic affects the financial positions of publicly traded U.S. corporations, the potential implications of these financial developments, and the federal policy response. The first blog discussed the financial positions before the pandemic started. It documented that many nonfinancial publicly traded companies entered 2020 with historically elevated levels of leverage. This second blog explains how we use stock returns to project the potential earnings losses due to Covid-19; this will be used in our next blog to project the ...
Working Paper
Debt Flexibility
This paper documents new facts on the modification of bank loans using FR Y-14Q regulatory data on C&I loans. We find that loan-level modifications of key contractual terms, such as interest and maturity, occur at least once for 41% of loans. Cross sectional differences in modifications are substantial and amplified by borrower distress. Relative to single-lender loans, syndicated loans are 1.5 times more likely to be modified and interest rate changes are twice as likely. Our findings call into question whether 1) creditor dispersion makes loan modifications more challenging and 2) ...
Working Paper
Debt Flexibility
This paper documents new facts on the modification of bank loans using FR Y-14Q regulatory data on C&I loans. We find that loan-level modifications of key contractual terms, such as interest and maturity, occur at least once for 41% of loans. Cross sectional differences in modifications are substantial and amplified by borrower distress. Relative to single-lender loans, syndicated loans are 1.5 times more likely to be modified and interest rate changes are twice as likely. Our findings call into question whether 1) creditor dispersion makes loan modifications more challenging and 2) ...
Financial Positions of U.S. Public Corporations: Part 3, Projecting Liquidity and Solvency Risks
This blog post is the third in a series that discusses how the current pandemic affects the financial positions of publicly traded U.S. corporations, the potential implications of these financial developments, and the federal policy response.In this post, we attempt to quantify the risk to the solvency and to the liquidity of U.S. public corporations, and how this risk can be reduced or eliminated by firms’ decisions. These calculations should be taken as illustrative only, given the high uncertainty about the evolution of the economy; they do not constitute a forecast, and reflect only the ...
Working Paper
Small and Large Firms over the Business Cycle
Drawing from confidential firm-level data of US manufacturing firms, we provide new evidence on the cyclicality of small and large firms. We show that the cyclicality of sales and investment declines with firm size. The effect is primarily driven by differences between the top 0.5% of firms and the rest. Moreover, we show that, due to the skewness of sales and investment, the higher cyclicality of small firms has a negligible influence on the behavior of aggregates. We argue that the size asymmetry is unlikely to be driven by financial frictions given 1) the absence of statistically ...
Financial Positions of U.S. Public Corporations: Part 4, Tax Relief
This blog post is the fourth in a series that discusses how the current pandemic affects the financial positions of publicly traded U.S. corporations, the potential implications of these financial developments, and the federal policy response. In this post, we discuss the adjustments to federal tax policy that have been initiated to support U.S. businesses and their possible effects. These measures represent a significant fiscal cost ($280 billion over ten years) and an even larger positive cash flow effect for businesses in 2020 (over $700 billion), because some measures are effectively ...
Financial Positions of U.S. Public Corporations: Part 5, The Main Street Lending Program: Potential Benefits and Costs
This blog post is the fifth in a series that discusses how the current pandemic affects the financial positions of publicly traded U.S. corporations, the potential implications of these financial developments, and the federal policy response. In this post, we study the economic benefits and costs of the Main Street Lending Program, created by the Federal Reserve to support corporations during this crisis. We make four points, which reflect our analysis and are not the views of the Federal Reserve System or the Federal Reserve Bank of Chicago. First, the main potential benefit of this program ...