1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

The law of the strongest? Exploring the drivers of firm performance during the COVID-19 crisis

Using data on more than 150.000 non-financial companies operating in both manufacturing and services sectors around the world, we analyse the drivers of firm performance throughout the whole COVID cycle (until end 2021). We highlight three key results. First, if anything, larger and older firms did worse than smaller and younger ones in terms of revenues and investment spending, both during COVID-19 and the subsequent recovery. Even in sectors that were under scrutiny from a competition standpoint, such as technology and healthcare, larger firms did not systematically over-perform. Second, ex-ante financial strength attenuated the effects of the shock on revenues during the COVID cycle. Third, there is some evidence of debt overhang: firms that entered the crisis with a higher leverage ratio invested less than others, including on R&D, both in 2020 and in 2021, while firms that became more debt-burdened during the pandemic tended to record weaker investment spending during the recovery. These insights shed light on market power, competition, and more generally on the performance of the corporate sector since the start of COVID-19 pandemic.

English

Keywords: market power, investment, corporate sector, firm size, competition, firm performance, financial fragility, debt overhang, COVID-19
JEL: D25: Microeconomics / Production and Organizations / Intertemporal Firm Choice: Investment, Capacity, and Financing; G01: Financial Economics / General / Financial Crises; L25: Industrial Organization / Firm Objectives, Organization, and Behavior / Firm Performance: Size, Diversification, and Scope; G32: Financial Economics / Corporate Finance and Governance / Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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