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Corporate insolvency and restructuring during COVID-19

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How did corporate insolvency and restructuring mechanisms evolve during the COVID-19 pandemic? Even though economic activity contracted, the number of insolvency and restructuring filings remained stable in 2020 and dropped consistently below the historical average in 2021. There were opposing factors conditioning this trend. Lower economic activity led to fewer insolvency and restructuring filings. In the economic activity sectors that were the most exposed to the pandemic, the number of filings was above the historical average in 2020 and stayed close to the average in 2021. In the remaining sectors, the number of filings stayed below the average in 2020 and 2021. Empirical results based on a natural experiment show that the credit moratorium, a policy that supported firm continuation, reduced the probability of insolvency. State of emergency restrictions had a negative but small effect on the number of filings.
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