Defaults on government guaranteed loans by potential high growth firms: Evidence from the COVID-19 period

Marek Kacer, Nicholas Wilson and Sana Zouari

Economics Letters, 2024, vol. 243, issue C

Abstract: Equity finance is used to fund innovative and growth-oriented businesses because of its resilience during economic downturns and investors' willingness to undertake higher risks compared to other financing. During the pandemic, 6500 equity-funded firms obtained government-guaranteed loans from traditional banks and new lenders. Our analysis of the determinants of loan default revealed that new lenders experienced a significantly higher default rate than the main banking sector. Additionally, firms funded by equity crowdfunding have a higher loan default rate than those backed by other equity providers. We explore the factors influencing defaults and variations by lender and investor type.

Keywords: Guaranteed loan; Equity-funded companies; Loan default; Lender type; Investor type; COVID-19 crisis (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 L26 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:243:y:2024:i:c:s0165176524004257

DOI: 10.1016/j.econlet.2024.111941

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