TITLE:
Do Financially Constrained Companies Increase More Leverage during COVID-19?
AUTHORS:
Lixu Xie
KEYWORDS:
Capital Structure, Leverage, Financing Constraints, COVID-19
JOURNAL NAME:
Open Journal of Business and Management,
Vol.13 No.6,
October
17,
2025
ABSTRACT: This paper examines the heterogeneous effects of COVID-19 on financial leverage for companies with different degrees of financing constraints using a dynamic panel regression model. It finds that the COVID-19 has had a great effect on company capital structure choices, and compared to unconstrained companies, financially constrained companies increase more leverage (mainly short-term leverage) during COVID-19 period. Further study confirms that credit supportive policies implemented by the government in the period benefit constrained firms, and enable them more convenient access to obtain more external short-term loans than usual.