Who Supplies PPP Loans (And Does it Matter)? Banks, Relationships and the COVID Crisis

Lei Li and Philip Strahan

No 28286, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze bank supply of credit under the Paycheck Protection Program (PPP). The literature emphasizes relationships as a means to improve lender information, which helps banks manage credit risk. Despite imposing no risk, however, PPP supply reflects traditional measures of relationship lending: decreasing in bank size; increasing in prior experience, in commitment lending, and in core deposits. Our results suggest a new benefit of bank relationships, as they help firms access government-subsidized lending. Consistent with this benefit, we show that bank PPP supply, based on the structure of the local banking sector, alleviates increases in unemployment.

JEL-codes: G2 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-ban
Note: CF
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Citations: View citations in EconPapers (34)

Published as Lei Li & Philip E. Strahan, 2021. "Who Supplies PPP Loans (and Does It Matter)? Banks, Relationships, and the COVID Crisis," Journal of Financial and Quantitative Analysis, vol 56(7), pages 2411-2438.

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