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

Abstract

Purpose – This 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/approach – This 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. Findings – The 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/value – COVID-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.

Keywords

• Oaxaca-Blinder decomposition
• COVID-19
• Moldavian economy
• Services sector
• Cash commitments
• Comparative analysis