Firms’ Financial Distress during the COVID-19 Pandemic and Fiscal Incentives
The coronavirus disease (COVID-19) pandemic has affected the business sector by disrupting production and shrinking demand due to strict physical distancing.
This study measures companies’ financial distress during the pandemic and examines the potential impact of fiscal incentives on financial performance. It focuses on companies in Indonesia and Malaysia, which have different fiscal policy incentives.
According to the study, firms experienced increased financial distress during the pandemic. The study also found that despite government interventions to ease corporate tax burdens, companies still rely on debt to support their operations due to a lack of internal financing from retained earnings.
The pandemic's impact also varied across sectors, with companies in travel and leisure; infrastructure, utilities, and transportation; and retail, being severely affected.
- Firms’ Financial Distress during the Pandemic
- Fiscal Incentives during the COVID-19 Pandemic
- Policy Recommendations
Published December 2021.
Source: Economic Research Institute for ASEAN and East Asia
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