Managing cash flow during a period of crisis : the Maltese COVID-19 experience

Abstract

Purpose: This study assesses the effects of the COVID-19 pandemic on the Cash Flow of Maltese Equity Listed Entities and identifies whether such entities recognised the paramount importance of Cash Flow Management. Moreover, the study analyses the cash management practices adopted by Maltese Listed Entities in order to maintain a healthy Cash Flow. Design: In order to meet the objectives of this study, a qualitative methodology was adopted. The researcher carried out a content analysis of the annual reports for financial year ended 2020, and the interim reports issued between end of 2019 and mid 2020. Based on that content analysis, the researcher conducted semis-structured interviews with Chief Financial Officers. Findings: The research findings show that the hospitality sector was the foremost sector which suffered the hardest financial hit as a result of the pandemic. It was noted that the core operations of the banking sector and the information technology sector, were minimally affected by the pandemic. Despite the dividend expectation culture which is still very prevalent in the local scenario, Maltese Listed Entities identified the importance to preserve the available cash resources, rather than focusing on the maximisation of profits. In fact, findings illustrate that Maltese Listed Entities took several decisions with respect to the operating, investing, and financing activities in order to conserve the available cash resources. Conclusions: The study concluded that Maltese Listed Entities are typically cash rich. However, they are still aware of the importance of having effective Cash Flow Management, especially during such a dire economic situation. Furthermore, all companies demonstrated their resilience and ability to manage their cash and liquidity effectively, since no going concern issues were identified as yet. Implications: The COVID-19 pandemic is still progressing; however, the COVID-19 vaccination brings hope for a better economic outlook. The future seems to be a bit more certain, however, Maltese Listed Entities should remain vigilant and continue to engage in preserving their cash resources effectively. Thereby, to weather the storm and remain in business once the pandemic is over.