Supporting small firms through recessions and recoveries

Diana Bonfim, Cláudia Custódio and Clara Raposo

Journal of Financial Economics, 2023, vol. 147, issue 3, 658-688

Abstract: We use variation in the access to a government credit certification program to estimate the financial and real effects of supporting small firms. This program was first implemented during the global financial crisis, but has remained active ever since, allowing us to analyze its effects both during recessions and recoveries. Eligible firms have access to government loan guarantees and a credit quality certification. We estimate real effects using a multidimensional regression discontinuity design. We find that eligible firms borrow more and at lower rates than non-eligible firms, allowing them to increase investment and employment during crises. Industry-level analysis shows reduced productivity heterogeneity in more exposed industries, which is consistent with improved credit allocation. However, when the economy is recovering the effects of the program are less pronounced and centered on the certification component. The cost-per-job in the recovery period is half of the one estimated for the crisis period (5784€ and 11,788€, respectively).

Keywords: Small firms’ financing; Credit rating; Credit certification; Cost of debt; Investment (search for similar items in EconPapers)
JEL-codes: G30 G38 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X23000144
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Supporting small firms through recessions and recoveries (2022)
Working Paper: Supporting small firms through recessions and recoveries (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:147:y:2023:i:3:p:658-688

DOI: 10.1016/j.jfineco.2023.01.004

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().