Capital structure of Portuguese firms

: debt and workforce evolution in covid-19

Abstract

This thesis analyses the impact that the Covid-19 pandemic had on debt and workforce and the differences of this impact over the different firm sizes and also on industry and region. The dataset includes 223 098 companies over the period from 2019 to 2023. Empirical findings indicate that while the overall increase in the debt ratio during the pandemic is not significant across the entire sample, micro firms experienced a significant rise in their debt. This result suggests that smaller firms, with reduced internal funds and liquidity levels, were more vulnerable to external shocks and thus more likely to increase debt under financial distress. In contrast, larger firms demonstrated greater resilience, reflecting their diversified funding sources and robust financial strategies. The analysis of workforce data reveals a notable decline in employment levels during the pandemic, particularly among SMEs (Small and medium enterprises). The results consistently show a negative association between increased debt levels and workforce size, supporting the notion that firms may reduce labor costs as a strategy to manage increased financial commitments during crisis periods. Sectors such as healthcare mitigated the negative impacts of the pandemic and even recorded improvements in both capital structure and employment, while industries such as construction and accommodation suffered more pronounced adverse effects. Urban centers like Lisbon and Porto, with a higher concentration of large firms, exhibited distinctive trends.

Date of Award	1 Jul 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Cunha (Supervisor)