The COVID-19 Bailouts

34 Pages Posted: 26 Apr 2020 Last revised: 26 May 2024

See all articles by Jean-Marie Meier

Jean-Marie Meier

The Wharton School, University of Pennsylvania; University of Texas at Dallas - Naveen Jindal School of Management

Jake Smith

Securities and Exchange Commission (SEC)

Date Written: May 29, 2020

Abstract

We use hand-collected data to investigate the COVID-19 bailouts for all publicly listed US firms. The median tax rate is 4% for bailout firms and 16% for no-bailout firms. The bailouts are expensive when compared to past corporate income tax payments of the bailout firms. We compute the number of years a bailout recipient has to pay corporate income tax to generate as much tax revenue as it received in bailouts: 135.0 years for the Paycheck Protection Program and 267.9 years for the airline bailouts. We also document a dark side of the bailouts. For many firms, the bailouts appear to be a windfall. Numerous bailout recipients made risky financial decisions, so bailing them out might induce moral hazard. Moreover, lobbying expenditures positively predict the bailout likelihood and amount.

Keywords: COVID-19, coronavirus, bailouts, too-big-to-fail, moral hazard

JEL Classification: G32, G38, H81

Suggested Citation

Meier, Jean-Marie and Smith, Jake, The COVID-19 Bailouts (May 29, 2020). Available at SSRN: https://ssrn.com/abstract=3585515 or http://dx.doi.org/10.2139/ssrn.3585515

Jean-Marie Meier (Contact Author)

The Wharton School, University of Pennsylvania ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

HOME PAGE: http://www.jean-mariemeier.com

University of Texas at Dallas - Naveen Jindal School of Management ( email )

Jindal School of Management
800 W. Campbell Road
Richardson, TX 75080
United States

HOME PAGE: http://www.jean-mariemeier.com/

Jake Smith

Securities and Exchange Commission (SEC) ( email )

1961 Stout Street
Suite 1700
Denver, CO 80294
United States

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