Impact of COVID-19 on food outlets: symmetric or asymmetric? A case study of Amritsar

PurposeThe present study is an intra-industry analysis, which aims to investigate whether the impact of COVID-19 on employment level, clientele rate, liquidity constraints and sustainability aspect of different food outlets is symmetric or asymmetric in nature.Design/methodology/approachWith the help of well-structured questionnaire, the study has surveyed 80 food outlets in total by interviewing the managers and owners of these outlets. Food outlets have been classified into four categories namely international, national, local and street food outlets. Econometric techniques like MANOVA and Garret ranking have been employed to fulfil the objective of the study.FindingsThe results depict that the impact of COVID-19 on employment level and liquidity constraints is significantly asymmetric amongst different groups of food outlets, even though the decline in extent of clientele is somewhat same for all groups. The survival aspect of outlets also witnesses clear-cut asymmetry in results as big outlets have greater potential to survive for longer if lockdown happens again when compared to street food outlets as their financial availability and stability differ.Research limitations/implicationsThe sample size of study is restricted, mainly due to lesser number of national franchise's food outlets available in Amritsar, though other categories of eateries were sufficient in number. Further, the study is restricted only to one district of Punjab state, whereas for future research, inter-district comparison can be done.Practical implicationsThe findings reveal that the street food outlets may gain by fostering its online functioning. Similarly national food outlets are encouraged to alter their business strategies to revive their sales against their competitors.Originality/valueThis study is one of the explorer studies to analyse the impact of COVID-19 by making an intra-industry comparison for the eatery industry – considering four different categories of eateries. The classification of eateries helps in analysing whether the employment level, clientele rate, liquidity constraints and survival perspective have been affected symmetrically for the whole eateries industry or does severity of being affected differ asymmetrically. The study makes a contribution by adding a new string of dimension to the existing load of literature in the domain of hospitality.

Liquidity Constraints in the U.S. Housing Market

We study the severity of liquidity constraints in the U.S. housing market using a life-cycle model with uninsurable idiosyncratic risks in which houses are illiquid, but agents can extract home equity by refinancing their mortgages. The model implies that four-fifths of homeowners are liquidity constrained and willing to pay an average of 13 cents to extract an additional dollar of liquidity from their home. Most homeowners value liquidity for precautionary reasons, anticipating the possibility of income declines and the need to make mortgage payments. The model reproduces well the observed response of consumption to tax rebates and mortgage relief programs and predicts large welfare gains from policies aimed at providing temporary liquidity relief to homeowners.

Modeling Non-Maturing Demand Deposits: A Proposed Methodology to Determining the Idiosyncratic Confidence Level Used for Separating Stable Deposit Volumes From Volatile Deposit Volumes

This paper aims to develop a methodology for the estimation of the idiosyncratic confidence level inherent within the process of determining the threshold of separation between volatile and stable deposit volumes. The idiosyncratic confidence level must be reflective of the institution’s specific risk preferences and liquidity risk management policies as anchored into the Principle 9 of the European Banking Authority and Basel Committee for Banking Supervision recommendations. We illustrate the proposed methodology by including liquidity constraints from the Basel III regulatory recommendations introduced in 2013. Furthermore, we point to other ancillary applications of such procedures in the financial risk management practice.

The firm growth-cash flow sensitivity: do financial constraints matter?

PurposeThe paper examines the differential effect of liquidity constraints on corporate growth using unbalanced panel data for 457 Pakistani firms over the period 2010–2017.Design/methodology/approachThe study uses the probability of a financial unconstrained index constructed by estimating the endogenous regression model. This approach provides a time-varying measure of financial position for all firm-year observations and takes into account the different degrees of liquidity constraints that a company faces in attaining funds from external markets. It is derived from a multivariate selection equation that simultaneously accounts for all-important features of the underlying company identified in the literature. The cash flow variable has then interacted with various groups of dummy variables for financial constraint, which allows the coefficient of cash flow to vary across firm-year observations in the different liquidity constraint categories. The two-step system-GMM estimator is applied to estimate the main empirical model.FindingsThe results of the study provide evidence of the heterogeneity in firms' growth sensitivity to internal funds, depending on the degree of liquidity constraints. Financing growth through internal funds is found to be essential for both liquidity unconstrained and constrained corporates. However, it is observed that the coefficient of cash flow is greater for firms that do not have access to external financing and it eventually decreases with reductions in the magnitude of liquidity constraints, making the least constrained corporates' growth less responsive to internal funds. The results further indicate that smaller and younger firms show higher responsiveness of growth to internal funds. This finding is mainly attributed to financial market imperfections that make external funding difficult for them.Practical implicationsThe results suggest that financially constrained firms should expand their corporate size more than the magnitude of positive income shocks they encounter. The study also suggests important policy implications for liquidity-constrained firms to carefully concentrate on their financing strategies to enhance their growth. By improving the corporate's capacity for production, corporates can achieve a faster effect of a potential positive income shock on their growth.Originality/valueThis paper contributes to the literature by constructing a financial constraint index by running the endogenous regression model. It also contributes by investigating the differential impact of credit constraints on firms' growth in Pakistan and how corporate size and age affect firm growth when financial constraints and investment opportunities are controlled.