The impact of Covid-19 across corporate debt structures

Abstract

This paper investigates the impact of the COVID-19-induced financial crisis across corporate debt structures. I uncover that firms with a high bond-to-total debt ratio tend to have higher stock returns during non crisis periods, but face lower returns with the onset of the pandemic. I suggest various explanations for why this is the case, including the most likely hypothesis that borrowing from the market is associated with higher volatility in returns. The analysis relies on an original and comprehensive database built on bond offering amounts matched with company fundamentals and stock price data from US firms.