Liquidity Management During the Covid‐19 Pandemic*

With the help of the United States Government and committed funding from bank credit lines, the United States corporate sector responded to the Covid‐19 cash flow shock by issuing long‐term debt to increase cash holdings. I use a case study, evidence from recent research, and a theoretical model to explain the logic behind the changes in corporate financial policy that happened during 2020, and to discuss the importance of United States Government policies to support the market for long‐term debt. I also point to open research questions about liquidity management, in particular questions that were highlighted by how companies reacted to the Covid‐19 pandemic.