Impact of French State-Guaranteed Loans on Company Financial Statements During the COVID-19 Crisis

Constantin Foreau (), Isabelle Girerd-potin () and Youssef Khoali
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Constantin Foreau: CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes
Isabelle Girerd-potin: CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes

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Abstract: The COVID-19 pandemic severely disrupted the global economy. As a result, most governments launched an unprecedented range of temporary credit and tax deferral programs. This article analyzes the effects of French state-guaranteed loans (SGLs) on financial statements and corporate default risk using the difference-in-differences method. The French SGL program studied enabled companies to benefit from loans without any limitations on eligibility in terms of size or sector. Prior to the crisis, companies participating in the program had lower cash flow, had higher debt, held more cash, were younger, and were more at risk of bankruptcy. Using a unique dataset, we show that companies participating in the program increased their debt and cash holdings more than others due to precautionary borrowing and cash buffering. We demonstrate that despite a reduction in bankruptcy during the COVID-19 crisis, participating companies had a higher bankruptcy risk after the crisis than they did before and compared to nonparticipants.

Keywords: Liquidity management; Financial statements; Government policy; Corporate default risk; COVID-19 crisis; Difference-in-differences method (search for similar items in EconPapers)
Date: 2025-12-31
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Published in Bankers, Markets & Investors (BMI), 2025, 183 (4), pp.28. ⟨10.54695/bmi.183.0028⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05609861

DOI: 10.54695/bmi.183.0028

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