Corporate Cash Hoarding During Times of Uncertainty - The Case of Covid-19
Covid-19 caused not only private individuals to stockpile toilet paper but also induced an unprecedented corporate run on credit lines. In March of 2020, just under 2000 US firms, including AAA-A rated firms, drew down almost $300 billion. Perhaps surprisingly, BBB rated firms exhibited greater demand for liquidity than the non-investment grades situated one step below them in the credit rating ladder. Although better rated firms, with the continuing support of the FED, were eventually able to resort to equity and public debt markets to finance themselves, lower rated firms continued drawing down their credit lines well into April.