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

42 Pages Posted: 10 Feb 2023 Last revised: 12 Apr 2023

See all articles by Bassam Fattouh

Bassam Fattouh

University of Oxford - Oxford Institute for Energy Studies

Beniamino Pisicoli

Bank of England

Pasquale Scaramozzino

University of Rome II - Faculty of Economics; University of London - School of Oriental and African Studies (SOAS); University of London - Centre for Financial and Management Studies (CeFIMS)

Date Written: February 7, 2023

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.

Keywords: leverage, corporate debt, debt ratio, quantile regression

JEL Classification: G30, G31, G32

Suggested Citation

Fattouh, Bassam and Pisicoli, Beniamino and Scaramozzino, Pasquale, Debt and Financial Fragility: Italian Non-Financial Companies after the Pandemic (February 7, 2023). CEIS Working Paper No. 551, Available at SSRN: https://ssrn.com/abstract=4350715 or http://dx.doi.org/10.2139/ssrn.4350715

Bassam Fattouh

University of Oxford - Oxford Institute for Energy Studies ( email )

57 Woodstock Road
Oxford, OX2 6FA
United Kingdom

Beniamino Pisicoli

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Pasquale Scaramozzino (Contact Author)

University of Rome II - Faculty of Economics ( email )

Via Columbia n.2
Rome, 00100
Italy

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom

University of London - Centre for Financial and Management Studies (CeFIMS)

Thornhaugh Street
London, WC1H 0XG
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
80
Abstract Views
503
Rank
551,501
PlumX Metrics