The Effect of Recessionary Fiscal Stimulus on Small Firm: Evidence from a Credit Guarantee Scheme in the UK

Posted: 17 May 2019 Last revised: 2 Apr 2020

See all articles by Juanita Gonzalez-Uribe

Juanita Gonzalez-Uribe

London School of Economics & Political Science (LSE) - Department of Finance

Su Wang

University of Amsterdam Business School

Date Written: April 1, 2020

Abstract

We estimate the impacts of small-firm credit guarantees launched in the UK during the Great Recession. For identification, we exploit the plausible exogenous variation in participation from the firm-size eligibility threshold. On average, eligible firms increase performance, survival, and employment, but not investment, relative to non-eligible firms. Results appear driven by a minority of businesses that takes up the scheme in industries with high costs to train workers. Our results are consistent with the guarantees enabling some financially constrained firms to retain critical workers, which otherwise would have been laid off, and which were fundamental to rebuild the businesses post-crisis.

Keywords: Collateral, Credit Guarantee Schemes, Employment, Financial Constraints, Investment, Irreversibilities

JEL Classification: D04, D22, G21, G28, G38, H32, H81

Suggested Citation

Gonzalez-Uribe, Juanita and Wang, Su, The Effect of Recessionary Fiscal Stimulus on Small Firm: Evidence from a Credit Guarantee Scheme in the UK (April 1, 2020). Available at SSRN: https://ssrn.com/abstract=3382280 or http://dx.doi.org/10.2139/ssrn.3382280

Juanita Gonzalez-Uribe

London School of Economics & Political Science (LSE) - Department of Finance ( email )

United Kingdom
+442074057686 (Phone)

Su Wang (Contact Author)

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

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