Company executives are more scared now than in 2008, according to Fed study based on hundreds of earnings calls

• Company executives are more scared now than they were in 2008, according to a study from the Fed that utilized machine learning to analyze hundreds of company earnings calls.
• The study found that actions consistent with financing concerns spiked dramatically in April as the coronavirus pandemic practically shut down economies across the globe.
• The share of firms that have drawn down on credit lines, cut dividends and buybacks, or cut investments is more than double what it was at the peak of the 2008-2009 global financial crisis, according to the study.
• Visit Business Insider's homepage for more stories.

Company executives are more scared now than they were in 2008.

That's according to a study from the Federal Reserve that was published Tuesday.

The study used machine learning to analyze hundreds of company earnings calls, gauge the sentiment of companies, and identify the actions they took amid the coronavirus pandemic.

The study found that actions consistent with financing concerns spiked dramatically in April.

According to the study: "The share of firms drawing down on credit lines, cutting equity payout, or cutting investment was 17, 27, and 42 percent, more than 6.5 standard deviations from their mean values of 2%, 5%, and 10%."

In fact, the share of firms that have drawn down on credit lines, cut dividends and buybacks, or cut investments is more than double what it was at the peak of the 2008-2009 global financial crisis.

Read more: These 22 well-known companies have a rare opportunity to soon get acquired due to the coronavirus crisis, BTIG says

"For comparison, during the peak of the 2008-2009 financial crises these numbers peaked at 7%, 11%, and 25%," Fed economists found.

The study used earnings call transcript data from S&P's Xpressfeed and searched for keywords like "buyback," "repurchase," and "dividend," along with relevant modifiers near those words like "reducing," "delaying," "stopping," "suspending," "cut," and more.

The Fed also searched for mention of "strong balance sheets," and found that 53% of firms mentioned strong balance sheets in April, double the value seen in previous months and exceeding the peak of 44% seen during the 2008-2009 financial crisis.

The Fed concluded that, "While these results do not address the magnitude of the drawdowns or payout cuts, the dramatic increase in the share of firms taking these actions indicates that financing concerns amid the COVID-19 outbreak are even more severe than they were in 2008."

How long will this fear last?

According to the Fed, data from 2008 suggests it will take a few months before companies have less financing concerns.

In 2008, there was a dramatic spike in financing concerns in September, and the level remained high into November. The concerns didn't die down until the fourth quarter of 2009, or 12 months later.

Therefore, if history is a guide, company financing concerns could remain elevated into June, and not calm down until April of 2021.

Read the original article on Business Insider