The COVID-19 insolvency gap: First-round effects of policy responses on SMEs

Arbeitspapier

COVID-19 placed a special role to fiscal policy in rescuing companies short of liquidity from insolvency. In the first months of the crisis, SMEs as the backbone of Europe's real economy benefited from large and mainly indiscriminate aid measures. Avoiding business failures in a whatever it takes fashion contrasts, however, with the cleansing mechanism of economic crises: a mechanism which forces unviable firms out of the market, thereby reallocating resources efficiently. By focusing on firms' pre-crisis financial standing, we estimate the extent to which the policy response induced an insolvency gap and analyze whether the gap is characterized by firms which had already struggled before the pandemic. With the policy measures being focused on smaller firms, we also examine whether this insolvency gap differs with respect to firm size. Based on credit rating and insolvency data for the near universe of actively rated German firms, our results suggest that the policy reponse to COVID-19 has triggered a backlog of insolvencies in Germany that is particularly pronounced among financially weak, small firms, having potential long term implications on economic recovery.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ZEW Discussion Papers ; No. 21-018

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Survey Methods; Sampling Methods ; Bankruptcy; Liquidation ; Crisis Management ; Technological Change: Government Policy
• Thema: COVID-19 policy response ; Corporate bankruptcy ; Cleansing e ect ; SMEs

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Dörr, Julian Oliver ; Murmann, Simona ; Licht, Georg
• Ereignis: Veröffentlichung
• (wer): ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
• (wo): Mannheim
• (wann): 2021

Weitere Informationen

• Handle: http://hdl.handle.net/10419/231304
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ