Last month’s earnings calls – some of the first to occur since the global coronavirus began – pointed to financing fears throughout corporate America that far exceeded the 2008 crisis, according to data collected by economists Andrew Y. Chen and Jie Yang and published in the journal SSRN Tuesday.
Some 42% of American non-financial public companies are discussing slashing investments, 27% are talking about equity payouts and 17% are focused on drawing down on credit lines, they concluded. At the peak of the last recession the figures were 25%, 11% and 7%, respectively.
The economists used machine-reading to scan more than 600 April earnings calls, searching for evidence of financial fears through the use of nouns such as “repurchase” and “dividend,” along with relevant modifiers such as “reducing and suspending.”
With quarterly earnings calls for many long-term care operators beginning this week, many expect these financing fears to affect the sector as well.
“While these results do not address the magnitude of the drawdowns or payout cuts, the dramatic increase in the share of firms taking these actions indicates that financing concerns amid the COVID-19 outbreak are even more severe than they were in 2008,” the researchers said.
