Has the pandemic support package changed the way shareholders manage their own funds?
A sustainable private sector requires long-term, sound management of profit, loss and shareholder’s equity. This applies to both large and small limited liability companies. During the Corona pandemic, several large and small financial support packages have been launched by the Government to save jobs and businesses. Researchers at Mälardalen University (MDH) are currently studying how shareholders' management of equity in times of crisis has changed.
The stability and long-term survival of limited liability companies is closely linked to how shareholders manage equity. Profits in the company can be distributed to the owners, who thereby receive a return on their investment. Conversely, owners may need to inject capital during periods of loss.
The various assistance packages launched by the Government in different stages during the ongoing Corona pandemic comprise an external factor in the relationship between the shareholders' and the company's capital. The support packages have included the following measures: short-term lay-offs, deferral of tax payments, restructuring assistance and turnover aid for individual business people, for example. According to Peter Dahlin, Associate Professor in Business Administration:
“In this project, we use pandemic support to study shareholders' management of equity in times of crisis, and then compare this with periods of more stability. Finally, we review the management on the basis of moral risk. In other words, is the hypothesis correct that profits should be distributed to the owners while losses are to be covered by the State?”
The research project "Aktieägares hantering av eget kapital - moralisk risk i tider av permitterings- och omställningsstöd" (Shareholders' management of equity – moral risk in times of layoffs and restructuring assistance) is financed from funds from the Jan Wallander and Tom Hedelius Foundations and the Tore Browaldh Foundation. The goal of the Foundations is to support social sciences research mainly in Business Administration, economics and economic history.