First Come, First Served: The Timing of Government Support and Its Impact on Firms

43 Pages Posted: 13 May 2021

See all articles by Matthew Denes

Matthew Denes

Carnegie Mellon University - Tepper School of Business

Spyridon Lagaras

University of Pittsburgh, Katz Graduate Business School

Margarita Tsoutsoura

Cornell University; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Date Written: April 9, 2021

Abstract

We study the effects of deploying government capital to firms during crises. Using exogenous variation in the timing of disbursements in the Paycheck Protection Program (PPP), we find that firms receiving PPP loans later become more financially distressed and face reductions in credit supply. These effects are amplified for firms with heightened financial constraints. We also show that firms receiving loans later have lower economic activity using in-store activity and shutdowns. The results are consistent with a direct channel on firm operations and a financing channel. Overall, our findings highlight the role of timely and uninterrupted fiscal support during crises.

Keywords: financial distress, fiscal policy, crises

JEL Classification: E62, G32, H12

Suggested Citation

Denes, Matthew and Lagaras, Spyridon and Tsoutsoura, Margarita, First Come, First Served: The Timing of Government Support and Its Impact on Firms (April 9, 2021). Available at SSRN: https://ssrn.com/abstract=3845046 or http://dx.doi.org/10.2139/ssrn.3845046

Matthew Denes (Contact Author)

Carnegie Mellon University - Tepper School of Business ( email )

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HOME PAGE: http://sites.google.com/site/matthewdenes

Spyridon Lagaras

University of Pittsburgh, Katz Graduate Business School ( email )

3950 Roberto Clemente Dr
334 Mervis Hall
Pittsburgh, PA Allegheny 15260
United States

Margarita Tsoutsoura

Cornell University ( email )

Ithaca, NY 14853
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

National Bureau of Economic Research (NBER) ( email )

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