Supporting small firms through recessions and recoveries

65 Pages Posted: 8 Jul 2021 Last revised: 31 Jan 2023

See all articles by Claudia Custodio

Claudia Custodio

Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Diana Bonfim

Banco de Portugal; Catholic University of Portugal (UCP) - Catolica Lisbon School of Business and Economics

Clara C. Raposo

ISEG Lisbon School of Economics & Management

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Date Written: January 23, 2022

Abstract

We use variation in the access to a government credit certification program to estimate the financial and real effects of supporting small firms. This program was first implemented during the global financial crisis, but has remained active ever since, allowing us to analyze its effects both during recessions and recoveries. Eligible firms have access to government loan guarantees and a credit quality certification. We estimate real effects using a multidimensional regression discontinuity design. We find that eligible firms borrow more and at lower rates than non-eligible firms, allowing them to increase investment and employment during crises. Industry-level analysis shows reduced productivity heterogeneity in more exposed industries, which is consistent with improved credit allocation. However, when the economy is recovering the effects of the program are less pronounced and centered on the certification component. The cost-per-job in the recovery period is half of the one estimated for the crisis period (5,784€ and 11,788€, respectively).

Keywords: SME financing, Credit Rating, Credit Access, Credit Certification

JEL Classification: G38, G30, G01

Suggested Citation

Custodio, Claudia and Bonfim, Diana and Raposo, Clara C., Supporting small firms through recessions and recoveries (January 23, 2022). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3879737 or http://dx.doi.org/10.2139/ssrn.3879737

Claudia Custodio (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Diana Bonfim

Banco de Portugal ( email )

Av Almirante Reis, 71
P-1150-012 Lisboa
Portugal

Catholic University of Portugal (UCP) - Catolica Lisbon School of Business and Economics ( email )

Palma de Cima
Lisbon, 1649-023
Portugal

Clara C. Raposo

ISEG Lisbon School of Economics & Management ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

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