Impact of COVID-19 exposure on working capital management: The moderating effect of investment opportunities and government incentives

Augustine Tarkom

Finance Research Letters, 2022, vol. 47, issue PB

Abstract: This study examines the impact of the COVID-19 pandemic on firms’ working capital management (WCM) covering 2,542 US-publicly traded firms for the period 2019Q1–2021Q2. Proxying WCM as cash conversion cycle (CCC), I find that COVID-19-exposed firms operate with higher levels of CCC. I show that firms with more investment opportunities and firms that receive government incentives (deferred taxes and investment tax credit (DT_ITC)) operate with lower levels of CCC. Overall, I provide evidence of the significant adverse impact of COVID-19 on WCM and show that the effect could be mitigated with an increase in investment opportunities and government incentives.

Keywords: Cash conversion cycle; Working capital management; Covid-19 exposure; Tobin's Q; Deferred taxes; Investment tax credit (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612321005924

DOI: 10.1016/j.frl.2021.102666

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