Policy Options for Supporting and Restructuring Firms Hit by the COVID-19 Crisis
79 Pages Posted: 24 Apr 2024
Date Written: February 1, 2022
Abstract
he COVID-19 pandemic significantly impacted the enterprise sector. Unprecedented policy measures helped avoid a wave of insolvencies, at least temporarily. But risks remain of corporate debt overhang and zombification of firms if untargeted support is prolonged and of a wave of insolvencies if support is removed abruptly. This paper presents principles that could guide the design of more targeted policy support and facilitate the restructuring of firms adversely impacted by the COVID-19 pandemic. To this end, the paper takes stock of vulnerabilities and risks in the enterprise sector and assesses countries’ preparedness to handle a large-scale restructuring of businesses. Crisis preparedness of insolvency systems is measured according to a newly designed indicator that includes five dimensions of the insolvency and restructuring regime.
Keywords: COVID-19 support programs, insolvency, enterprise restructuring, default risk
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