We investigate the consequences of adopting a new accrual-based relief mechanism on private firms' borrowing capacity. During the COVID-19 pandemic, the Italian government implemented a temporary change in accounting rules that allowed firms to suspend up to the entire amount of their depreciation and amortisation charges. Using a sample of Italian firms from 2018 to 2021 and a difference-in-difference model, we show that the depreciation and amortisation suspension policy (DASP) adopters, compared to non-adopters, access larger loans and negotiate a lower cost of debt than in the pre-DASP period. Our results are robust to additional tests for potential endogeneity and confounding factors such as earnings management and the adoption of other accounting-based relief mechanisms. We provide evidence that accrual-based relief mechamisms have real economic effects and are effective measures to support firms in managing a systemic shock.
The Italian depreciation suspension policy during the COVID-19 pandemic: Consequences on private firms’ borrowing capacity / Mattei Marco Maria, Merlo Matteo, Monaco Eleonora. - In: ACCOUNTING IN EUROPE. - ISSN 1744-9480. - ELETTRONICO. - 20:2(2023), pp. 166-193. [10.1080/17449480.2023.2174444]
The Italian depreciation suspension policy during the COVID-19 pandemic: Consequences on private firms’ borrowing capacity
Mattei M. M.;Merlo MATTEO;Monaco ELEONORA
2023
Abstract
We investigate the consequences of adopting a new accrual-based relief mechanism on private firms' borrowing capacity. During the COVID-19 pandemic, the Italian government implemented a temporary change in accounting rules that allowed firms to suspend up to the entire amount of their depreciation and amortisation charges. Using a sample of Italian firms from 2018 to 2021 and a difference-in-difference model, we show that the depreciation and amortisation suspension policy (DASP) adopters, compared to non-adopters, access larger loans and negotiate a lower cost of debt than in the pre-DASP period. Our results are robust to additional tests for potential endogeneity and confounding factors such as earnings management and the adoption of other accounting-based relief mechanisms. We provide evidence that accrual-based relief mechamisms have real economic effects and are effective measures to support firms in managing a systemic shock.File | Dimensione | Formato | |
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