Professor of Finance Vesa Puttonen and third-year students Valtteri Heikkala and Omar Khary published on Thursday 26 March their report entitled ‘Case corona: cash flow situation in the restaurant and accommodation sectors’. In this, they analysed the sustainability of the cash flow situation in the restaurant and accommodation sectors based on the companies’ financial statements.
The results show that, without external assistance, around 39–50% of companies face payment difficulties in the first month after the collapse in revenues.
The report is extremely relevant, as the Finnish Government announced on Tuesday 24 March that it would try to close restaurants, cafés and pubs as soon as possible in order to control the coronavirus epidemic.
According to Vesa Puttonen, the impetus for preparing the report was based on a conversation he had had with a friend just one week earlier. ‘He asked whether the School of Business could now analyse how the corona crisis is affecting business activities. On the same day, two exchange students emailed him. They said they had returned early from their exchange studies due to the corona crisis and asked about the possibility of carrying out a project while in quarantine, because they nevertheless wanted to proceed with their studies. I suggested that we could carry out a project on the impact of the current crisis, since we have the financial statements of companies at our disposal.’
As the government's plan to close the restaurants seemed to be moving forward, the working group decided to focus on the restaurant and accommodation sectors.
‘We understood that there was already a need for such calculations this very week,’ says Vesa Puttonen.
Putting a price tag on restaurant closure
The aim of the report is to provide decision-makers with information that will enable them to assess how large the economic impacts will be if restaurants are closed.
‘Because people have been required to stay at home, the operating conditions for the restaurant and accommodation sector have clearly deteriorated. We do not take a stand on whether or not these sectors should be subsidised, but a completely exceptional decision to interfere in the freedom to engage in business will have a significant impact on companies’ operating conditions. It is possible to calculate an approximate price tag for this, so that is what we set out to do,’
The report was published online and immediately received a lot of publicity. This also illustrated the power of social media for disseminating socially significant research data. Vesa Puttonen, who is known as an active tweeter, shared the report from his Twitter account, thus putting the information out to a wide audience very quickly.
Professor Puttonen stresses the importance of engaging in relevant research, and he is also grateful for the capable students who worked with him on the report.
‘The economy has been hit by a completely unforeseen shock. At this moment we, the well-off members of society, have a particularly pressing obligation to utilise the information and databases at our disposal to support decision-making. A suitable combination of experience and student enthusiasm can produce rewarding projects that are also helpful for decision-makers.’
Puttonen Vesa, Heikkala Valtteri, Khary Omar. Case corona: the cash flow situation in the restaurant and accommodation sectors. (In Finnish). Aalto University School of Business, Department of Finance. https://www.aalto.fi/sites/g/files/flghsv161/files/2020-03/Case_Korona_26032020.pdf
Vesa Puttonen, Professor
Aalto University School of Business, Department of Finance
+358 (0)40 709 0284