{"title":"The Risk of Being a Fallen Angel and the Corporate Dash for Cash in the Midst of COVID.","authors":"Viral V Acharya, Sascha Steffen","doi":"10.1093/rcfs/cfaa013","DOIUrl":"https://doi.org/10.1093/rcfs/cfaa013","url":null,"abstract":"<p><p>Data on firm-loan-level daily credit line drawdowns in the United States expose a corporate \"dash for cash\" induced by the COVID-19 pandemic. In the first phase of the crisis, which was characterized by extreme precaution and heightened aggregate risk, <i>all</i> firms drew down bank credit lines and raised cash levels. In the second phase, which followed the adoption of stabilization policies, only the highest-rated firms switched to capital markets to raise cash. Consistent with the risk of becoming a fallen angel, the lowest-quality BBB-rated firms behaved more similarly to non-investment grade firms. The observed corporate behavior reveals the significant impact of credit risk on corporate cash holdings.</p>","PeriodicalId":75179,"journal":{"name":"The review of corporate finance studies","volume":" ","pages":"cfaa013"},"PeriodicalIF":0.0,"publicationDate":"2020-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7454892/pdf/","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144276975","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}