Author: Eunsook Seo(Sangmyung University), Sanghyun Hwang(Sangmyung University)

In the event of an economic crisis, financial stability will also deteriorate if companies' performance falls sharply and profitability does not improve thereafter. Accordingly, there is a high need to select industries for liquidity support, and this paper proposes a plan and applies it to the COVID-19 case. Using financial data from external audit companies between 2008 and 2020, this paper analyzes financial stability through estimating the probability of cash crunch risk by industry. Then it derives liquidity support targets and evaluates liquidity support effects. Together with this, it evaluates the inefficiency of resource allocation through estimating the effect on productivity of companies vulnerable to financial stability by industry, and it presents implications for efficient support when government funding is limited. The result of this analysis is that when considering the inefficiency of resource allocation over the support effect in liquidity support due to the COVID-19 shock, transportation and lodging-and-restaurant industries are prioritized support targets, and construction industries are subordinated support targets among the industries in 18 KSIC sections. In addition, among the manufacturing industries in 24 KSIC divisions, automobile-and-trailer manufacturing industries become prioritized support targets, and other-transportation-equipment manufacturing industries become subordinated support targets.