Did the Paycheck Protection Program Help Small Businesses? Evidence from Commercial Mortgage-backed Securities

75 Pages Posted: 16 Aug 2020 Last revised: 23 Mar 2022

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Brent W. Ambrose

Pennsylvania State University

Luis A. Lopez

University of Illinois at Chicago

Xue Xiao

Pennsylvania State University

Date Written: August 12, 2021

Abstract

In this study, we examine the broader economic effects of the U.S. federal government's Paycheck Protection Program (PPP) by focusing on the performance of securitized commercial mortgages following the coronavirus (COVID-19) pandemic. We provide novel evidence for spillover effects of government interventions in the face of economic crises. We find that the PPP reduced mortgage delinquencies by approximately $28.97 billion in 2020, which is equivalent to about 50% of the average annual CMBS defaults seen during the Great Financial Crisis. The strongest effects occur when PPP funds targeted businesses in areas most affected by COVID-19, where banks overperformed in providing PPP loans, and among mortgages on properties in retail and lodging. Thus, PPP relief to small businesses eased economic distress beyond the labor market.

Keywords: COVID-19, CARES Act, Paycheck Protection Program, Mortgages

JEL Classification: G21, G28, R51, I18

Suggested Citation

Agarwal, Sumit and Ambrose, Brent W. and Lopez, Luis A. and Xiao, Xue, Did the Paycheck Protection Program Help Small Businesses? Evidence from Commercial Mortgage-backed Securities (August 12, 2021). Available at SSRN: https://ssrn.com/abstract=3674960 or http://dx.doi.org/10.2139/ssrn.3674960

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Brent W. Ambrose

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-867-0066 (Phone)
814-865-6284 (Fax)

Luis A. Lopez (Contact Author)

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

Xue Xiao

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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