Abstract
This paper analyses the determinants of firm participation in the Swiss COVID-19 loan programme, which aims to bridge firms’ liquidity shortfalls that have resulted from the pandemic. State-guaranteed COVID-19 loans are widely used by Swiss firms, with 20% of all firms participating, resulting in a sizeable programme of 2.4% of GDP. We use a comprehensive dataset to study the determinants of firm participation. Our results can be summarised as follows. First, participation was largely driven by the exposure of a firm to lockdown restrictions and to the intensity of the virus in the specific region. Second, we show that firms associated with lower liquidity ratios had a significantly higher probability of participating in the programme. Third, we find no clear evidence that firm indebtedness affected participation in the programme and no evidence that pre-existing potential “zombie firms” participated more strongly in the loan programme. Fourth, we show that the programme reached younger and smaller firms, which could be financially more vulnerable as they are less likely to obtain outside finance during a crisis. Overall, we conclude that given its objective, the programme appears to be successful.
Highlights
Aside from its impact on public health, the COVID-19 pandemic caused a major economic shock
6 Conclusions We analyse the determinants of firm participation in the Swiss COVID-19 loan programme by using a comprehensive dataset
20% of all firms applied for a COVID-19 loan, resulting in a sizeable programme of 2.4% of Gross domestic product (GDP)
Summary
Aside from its impact on public health, the COVID-19 pandemic caused a major economic shock. The COVID-19 loan programme focuses on SMEs and aims to provide quick access to bank financing Both of those aspects are motivated by the structure of firms in Switzerland and their financing sources. The data indicate that a significant share of Swiss SMEs do not have an established credit relationship This might be a problem if firms suddenly have to bridge liquidity shortfalls by outside finance (e.g. bank debt) and could be problematic for young firms that have existed for only a couple of years. Our data set shows that firms participated in the loan programme across sectors and cantons. The 2017 average ratios across headcount groups within sectors, are available from CompNet. Figure 3 shows the distribution of the main explanatory variables by firm participation in the loan programme. While the debt ratio’s 75th percentile is higher for firms with a COVID-19 loan, the median does not differ from that of firms without a loan
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