Impact of COVID-19 exposure on working capital management: The moderating effect of investment opportunities and government incentives

This study examines the impact of the COVID-19 pandemic on firms' working capital management (WCM) covering 2,542 US-publicly traded firms for the period 2019Q1-2021Q2. Proxying WCM as cash conversion cycle (CCC), I find that COVID-19-exposed firms operate with higher levels of CCC. I show that firms with more investment opportunities and firms that receive government incentives (deferred taxes and investment tax credit (DT_ITC)) operate with lower levels of CCC. Overall, I provide evidence of the significant adverse impact of COVID-19 on WCM and show that the effect could be mitigated with an increase in investment opportunities and government incentives.