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

46 Pages Posted: 28 Dec 2020 Last revised: 16 Apr 2022

See all articles by Lei Li

Lei Li

Board of Governors of the Federal Reserve System

Philip E. Strahan

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2020

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.

Suggested Citation

Li, Lei and Strahan, Philip E., Who Supplies PPP Loans (and Does it Matter)? Banks, Relationships and the Covid Crisis (December 2020). NBER Working Paper No. w28286, Available at SSRN: https://ssrn.com/abstract=3756318

Lei Li (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Philip E. Strahan

Boston College - Department of Finance ( email )

Carroll School of Management
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HOME PAGE: http://www2.bc.edu/~strahan

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