Did high leverage render small businesses vulnerable to the COVID-19 shock?

Arbeitspapier

Using supervisory data on small and mid-sized nonfinancial enterprises (SMEs), we find that those SMEs with higher leverage faced tighter constraints in accessing bank credit after the COVID-19 outbreak in spring 2020. Specifically, SMEs with higher pre-COVID leverage obtained a smaller volume of new loans and had to pay a higher spread on them during the pandemic period. Consistent with an inward shift in loan supply, these effects were concentrated in loans originated by banks with below-median capital buffers. Highly levered SMEs that relied on low-capital large banks for funding before the pandemic were not able to substitute to other sources of debt financing and thus experienced more of a reduction in total debt as well as a decline in investment and employment. On the other hand, the unprecedented public support, especially the Paycheck Protection Program (PPP), mitigated the adverse real effect stemming from bank credit constraints.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Papers ; No. 22-13

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Thema: leverage ; small business ; credit supply ; bank capital

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bräuning, Falk ; Fillat Comenge, José Luis ; Wang, J. Christina
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of Boston
• (wo): Boston, MA
• (wann): 2022

Weitere Informationen

• DOI: doi:10.29412/res.wp.2022.13
• Handle: http://hdl.handle.net/10419/273034
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ