Arbeitspapier
Did high leverage render small businesses vulnerable to the COVID-19 shock?
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.
- Sprache
-
Englisch
- Erschienen in
-
Series: Working Papers ; No. 22-13
- 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
- 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
- DOI
-
doi:10.29412/res.wp.2022.13
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Bräuning, Falk
- Fillat Comenge, José Luis
- Wang, J. Christina
- Federal Reserve Bank of Boston
Entstanden
- 2022
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