Equity financing during the Covid-19 economic downturn

Styliani (Elina) Panetsidou; Angelos Synapis

doi:10.1007/s11156-024-01335-8

Equity financing during the Covid-19 economic downturn

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

5 Downloads (Pure)

Abstract

We examine the effect of raising equity during the exogenous shock of Covid-19 economic downturn. Using a difference-in-differences methodology, we find that firms that issue equity during Covid-19 exhibit higher stock performance and lower likelihood of financial distress. Also, issuing firms maintain their payout and investment decisions and increase dividends and R&D through the pandemic. We further show that early issuers use the capital raised to build up more cash reserves while later issuers use the capital to increase investment activities. Firms that issue equity publicly tend to increase their dividend and R&D activities, while private equity issuers tend to increase more their cash reserves. Finally, issuers from industries that were highly affected by the pandemic experience higher stock performance and build more cash reserves, while those from less affected industries exhibit lower likelihood of default and increase dividends and R&D activities.

Original language	English
Article number	102855
Pages (from-to)	1391-1430
Number of pages	40
Journal	Review of Quantitative Finance and Accounting
Volume	64
Issue number	3
Early online date	27 Aug 2024
DOIs	https://doi.org/10.1007/s11156-024-01335-8
Publication status	Published - Apr 2025

Bibliographical note

Publisher Copyright:
© The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2024.

Funding

We are grateful to Cheng-Few Lee (the editor) and two anonymous reviewers for their insightful comments and suggestions. We thank Henry Agyei-Boapeah, Heitor Almeida, Panagiotis Andrikopoulos, Yilmaz Guney, Mehtap Hisarciklilar, Costas Lambrinoudakis, Zhenya Liu, Andreas Milidonis, Daniel Santamaria, and Fanis Tsoligkas for their comments in prior versions of this study. We also thank the participants at the 2023 British Accounting and Finance Association (BAFA) conference, the 2023 Financial Engineering and Banking Society (FEBS) conference, the 2023 Hellenic Finance and Accounting Association (HFAA) conference, the 2024 Financial Management and Accounting Research Conference (FMARC), and the Centre for Financial and Corporate Integrity (CFCI) seminar series for their helpful comments. All remaining errors are our own.

Keywords

Covid-19
Equity issue
Financial decisions
Financial distress
Stock performance

Access to Document

10.1007/s11156-024-01335-8

Synapis2024AAMAccepted author manuscript, 693 KB

Cite this

@article{373aac49586445aa9e7dc8668dd4e950,

title = "Equity financing during the Covid-19 economic downturn",

abstract = "We examine the effect of raising equity during the exogenous shock of Covid-19 economic downturn. Using a difference-in-differences methodology, we find that firms that issue equity during Covid-19 exhibit higher stock performance and lower likelihood of financial distress. Also, issuing firms maintain their payout and investment decisions and increase dividends and R\&D through the pandemic. We further show that early issuers use the capital raised to build up more cash reserves while later issuers use the capital to increase investment activities. Firms that issue equity publicly tend to increase their dividend and R\&D activities, while private equity issuers tend to increase more their cash reserves. Finally, issuers from industries that were highly affected by the pandemic experience higher stock performance and build more cash reserves, while those from less affected industries exhibit lower likelihood of default and increase dividends and R\&D activities. ",

keywords = "Covid-19, Equity issue, Financial decisions, Financial distress, Stock performance",

author = "Panetsidou, \{Styliani (Elina)\} and Angelos Synapis",

note = "Publisher Copyright: {\textcopyright} The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2024.",

year = "2025",

month = apr,

doi = "10.1007/s11156-024-01335-8",

language = "English",

volume = "64",

pages = "1391--1430",

journal = "Review of Quantitative Finance and Accounting",

issn = "0924-865X",

publisher = "Springer Verlag",

number = "3",

}

TY - JOUR

T1 - Equity financing during the Covid-19 economic downturn

AU - Panetsidou, Styliani (Elina)

AU - Synapis, Angelos

N1 - Publisher Copyright: © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2024.

PY - 2025/4

Y1 - 2025/4

N2 - We examine the effect of raising equity during the exogenous shock of Covid-19 economic downturn. Using a difference-in-differences methodology, we find that firms that issue equity during Covid-19 exhibit higher stock performance and lower likelihood of financial distress. Also, issuing firms maintain their payout and investment decisions and increase dividends and R&D through the pandemic. We further show that early issuers use the capital raised to build up more cash reserves while later issuers use the capital to increase investment activities. Firms that issue equity publicly tend to increase their dividend and R&D activities, while private equity issuers tend to increase more their cash reserves. Finally, issuers from industries that were highly affected by the pandemic experience higher stock performance and build more cash reserves, while those from less affected industries exhibit lower likelihood of default and increase dividends and R&D activities.

AB - We examine the effect of raising equity during the exogenous shock of Covid-19 economic downturn. Using a difference-in-differences methodology, we find that firms that issue equity during Covid-19 exhibit higher stock performance and lower likelihood of financial distress. Also, issuing firms maintain their payout and investment decisions and increase dividends and R&D through the pandemic. We further show that early issuers use the capital raised to build up more cash reserves while later issuers use the capital to increase investment activities. Firms that issue equity publicly tend to increase their dividend and R&D activities, while private equity issuers tend to increase more their cash reserves. Finally, issuers from industries that were highly affected by the pandemic experience higher stock performance and build more cash reserves, while those from less affected industries exhibit lower likelihood of default and increase dividends and R&D activities.

KW - Covid-19

KW - Equity issue

KW - Financial decisions

KW - Financial distress

KW - Stock performance

UR - https://www.scopus.com/pages/publications/86000385275

U2 - 10.1007/s11156-024-01335-8

DO - 10.1007/s11156-024-01335-8

M3 - Article

SN - 0924-865X

VL - 64

SP - 1391

EP - 1430

JO - Review of Quantitative Finance and Accounting

JF - Review of Quantitative Finance and Accounting

IS - 3

M1 - 102855

ER -

Equity financing during the Covid-19 economic downturn

Abstract

Bibliographical note

Funding

Keywords

Access to Document

Other files and links

Fingerprint

Cite this