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Did you save some cash for a rainy COVID-19 day? The crisis and SMEs

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Cowling_2020_Did_you_save_some_cash_ISBJ_AAM.pdf (502.5Kb)
Date
01/11/2020
Author
Cowling, Marc
Brown, Ross
Rocha, Augusto
Keywords
Cash balances
COVID-19
Precautionary saving
Risk
SMEs
HD28 Management. Industrial Management
3rd-DAS
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Abstract
As COVID-19 spreads across the globe, a common public policy response has been to enforce the temporary closure of non-essential business activity. In some countries, governments have underwritten a proportion of the wage income for staff forced to furlough or broadened their welfare systems to accommodate newly laid off workers or small business owners. While these actions are helpful, they do not explicitly address the lack of sales trading activity on business income and cash balances. In commentary, we identify what types of businesses have been increasing their cash holdings in the lead up to COVID-19 as an indication of what types of small and medium-sized enterprises (SMEs) are most at risk if the lockdown extends for a protracted period of time. We find that only 39% of the of businesses were bolstering their cash balances leading up to COVID-19 which suggests that 61% of businesses may run out of cash, including 8.6% that had no retained earnings whatsoever with micro firms at particular risk. The importance of precautionary saving for SMEs is critical to enhance resilience when Black Swan events occur.
Citation
Cowling , M , Brown , R & Rocha , A 2020 , ' Did you save some cash for a rainy COVID-19 day? The crisis and SMEs ' , International Small Business Journal , vol. 38 , no. 7 , pp. 593-604 . https://doi.org/10.1177/0266242620945102
Publication
International Small Business Journal
Status
Peer reviewed
DOI
https://doi.org/10.1177/0266242620945102
ISSN
0266-2426
Type
Journal article
Rights
Copyright © 2020 the Author(s). This work has been made available online in accordance with publisher policies or with permission. Permission for further reuse of this content should be sought from the publisher or the rights holder. This is the author created accepted manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://doi.org/0.1177/0266242620945102.
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  • University of St Andrews Research
URI
http://hdl.handle.net/10023/20609

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