What individual data tells us about the COVID-19 impact on corporate liquidity in 2020

Using rich granular data for over 645 000 French firms in 2020, this paper builds a micro-simulation model to assess the impact of the COVID-19 crisis on corporate liquidity. Going beyond the aggregate picture, we document that while net debt has been fairly stable at the macroeconomic level, individual heterogeneity is widespread. Significant dispersion in changes in net debt prevails both between and within industries, before as well as after public support. We show that the probability to experience a negative liquidity shock as well as the intensity of this shock are negatively correlated with the initial credit quality of the firm (based on Banque de France internal ratings). Our model also finds that public support dampens significantly the impact of Covid on the dispersion of liquidity shocks and brings back the distribution of liquidity shocks closer to its pre-crisis path but with fatter tails.