Indirect Costs of Government Aid and Intermediary Supply Effects: Lessons From the Paycheck Protection Program

Tetyana Balyuk, Nagpurnanand R. Prabhala and Manju Puri

No 28114, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The $669 billion Paycheck Protection Program (PPP) provides highly subsidized financing to small businesses. The PPP is a positive shock in financing supply to the small, highly constrained publicly listed firms in our sample and has average positive treatment effects. Yet, uptake is not universal. In fact, several firms return PPP funds before use, and curiously, experience positive valuation effects when they do so. These firms desire and the markets value the release from government oversight even if it means giving up cheap funding. The PPP is also a demand shock to the banks making PPP loans. Intermediary supply effects shape PPP delivery. Larger borrowers enjoy earlier PPP access, an effect that is more pronounced in big banks. The results have implications for policy design, the costs of being public, and bank-firm relationships.

JEL-codes: E61 G32 G38 H81 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-cfn
Note: CF ME PE
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Citations: View citations in EconPapers (14)

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