Sizing Up Corporate Restructuring in the COVID-19 Crisis

Robin Greenwood, Ben Iverson and David Thesmar
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Robin Greenwood: Harvard University
Ben Iverson: Brigham Young University
David Thesmar: Massachusetts Institute of Technology

Brookings Papers on Economic Activity, 2020, vol. 51, issue 3 (Fall), 391-441

Abstract: In the wake of the COVID-19 pandemic, the financial and legal system will need to deal with a surge of financial distress in the business sector. Some firms will be able to survive, while others will face bankruptcy and thus need to be liquidated or reorganized. Many surviving firms will need to be downsized or acquired. In normal times, this triage is supported by the court system, banks, and financial markets. The goal of this paper is to size up the coming surge of financial distress, list the challenges it presents in the current environment, and offer potential policy solutions. Overall, our analysis suggests that the two key issues will be court congestion and excess liquidation and failure of small firms.

Keywords: COVID-19; small firm; corporate (search for similar items in EconPapers)
Date: 2020
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