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Small firms amidst COVID‐19: Financial constraints and role of government support

Radeef Chundakkadan, Rajesh Raj Natarajan and Subash Sasidharan

Economic Notes, 2022, vol. 51, issue 3

Abstract: The coronavirus disease 2019 has severely affected the financially constrained small and medium enterprises (SMEs). In response, various countries employed several policies to support SMEs. Using rich firm‐level data from 34 countries, we study the impact of the pandemic‐led crisis on cash‐strapped SMEs and the role of governments in offsetting losses. Our results suggest that (i) government support programmes target mostly financially constrained firms; (ii) firms adjustments to the pandemic are associated with the likelihood of government support; (iii) financially constrained firms are more likely to lay off workers; and (iv) financially constrained firms layoff more male employees than female employees.

Date: 2022
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