How does COVID-19 affect firms' short-term financial pressure? Evidence from China

In this paper, we investigate how the COVID-19 pandemic affected the short-term financial pressure of listed companies in China. Using a difference-in-difference methodology, we find that firms hit by pandemic shocks suffered significant declines in liquidity levels and increased bankruptcy risk. Non-state-owned enterprises and firms without prior banking relationships suffered more significant liquidity pressure during this crisis than state-owned enterprises and firms with a prior banking relationship.