How to Outlast a Pandemic: Corporate Payout Policy and Capital Structure Decisions During COVID-19

The outbreak of the Covid-19 pandemic massively increased uncertainty about firms’ cash flows and their access to financial markets. We examine its effect on firms’ strategies for preserving cash by suspending dividends and buybacks and raising new funds through bond and equity issues. We identify key firm and stock characteristics that help explain a large portion of the cross-sectional variation in firms’ payout and financing decisions and show that the expansive monetary policies pursued by the Federal Reserve in the early phase of the pandemic crucially affected the timing and sequencing of these decisions.