Agribusiness resilience during the COVID-19 pandemic: The role of credit constraints

This paper investigates the effect of pre-COVID credit constraints and the moderating role of government support on agribusiness resilience following the outbreak of COVID-19. Using a dataset covering 42 countries, we provide empirical evidence on how firm characteristics and credit constraints affect agribusinesses' likelihood of survival and performance during the pandemic. On the enterprise level, size, foreign ownership and gender of the manager are found to display a statistically significant relationship with closure and sales performance. The findings reveal that pre-existing credit constraints tended to magnify the negative impacts of the pandemic. Specifically, agribusinesses with better access to finance were less likely to experience a decline in sales and exit from the market and, hence, were in a better position to withstand pandemic-induced shock. The results further highlighted the positive role of government support on agribusiness resilience, whereas obtaining government aid was found to have no significant effect on moderating the link between financial conditions and resilience. Finally, the results showed that financially constrained agribusinesses are more likely to suffer from liquidity/cash flow problems and experience overdue financial obligations during the pandemic. In coping with their liquidity shortfalls, these agribusinesses were less likely to access formal credit and more likely to delay payments to suppliers/workers.