Cash Holdings, Commercial Paper and Liquidity

Managing Liquidity has seldom been being as vital as it has during the Covid-19 era. The financial impact of Covid-19 has left many firms on the brink of liquidation. This paper explores the effect cash holdings has had on Profitability of the firm and how it compares with commercial paper between the pre-Covid-19 era and the Covid-19 era. This paper employs and compares the ordinary least square regression between these eras. I find that firms are less liquid during the Covid-19 period compared to the pre-covid period. More importantly, I find that Liquidity has been more critical to a firm's Profitability during Covid-19 era compared to pre-covid 19 periods. Furthermore, Cash holdings represent a significant chunk of Liquidity. However, these Cash holdings dropped by a little in the covid-19 era. Finally, I find that both commercial paper and cash holdings are used as complements. However, this result is weakly supported during the pre-covid period.