Deferring cash commitments to mitigate COVID-19 impact on the service sector: a case study of a transition economy

Abstract

PurposeThis study aims to use a comparative analysis to examine the channel of deferring cash commitments, which can be seen as a strategic solution to mitigate the impact of COVID-19 on Moldova's service sector.Design/methodology/approachThis paper uses the Oaxaca–Blinder decomposition analysis. The World Bank's post-COVID-19 survey is used. The methodology takes into account heterogeneity among firms.FindingsThe results of the Oaxaca–Blinder decomposition analysis show that service firms use deferred cash commitments more than industrial firms, corporate governance and their pandemic-related strategies are also effective in the post-COVID Moldovan economy. The results are robust to different modeling alternatives.Originality/valueCOVID-19 can be considered a key source of uncertainty for firms, especially those operating in economies where financial frictions occasionally occur in a transition economy. Therefore, this study can shed new light on the impact of COVID-19 on financial strategies in a transition economy.