The Italian depreciation suspension policy during the COVID-19 pandemic: consequences on private firms’ borrowing capacity

Marco Maria Mattei, Matteo Merlo and Eleonora Monaco

Accounting in Europe, 2023, vol. 20, issue 2, 166-193

Abstract: We investigate the consequences of adopting a new accrual-based relief mechanism on private firms’ borrowing capacity. During the COVID-19 pandemic, the Italian government implemented a temporary change in accounting rules that allowed firms to suspend up to the entire amount of their depreciation and amortisation charges. Using a sample of Italian firms from 2018 to 2021 and a difference-in-differences model, we show that the depreciation and amortisation suspension policy (DASP) adopters, compared to non-adopters, access larger loans and negotiate a lower cost of debt than in the pre-DASP period. Our results are robust to additional tests for potential endogeneity and confounding factors such as earnings management and the adoption of other accounting-based relief mechanisms. We provide evidence that accrual-based relief mechanisms have real economic effects and are effective measures to support firms in managing a systemic shock.

Date: 2023
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DOI: 10.1080/17449480.2023.2174444

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