Policy Options for Supporting and Restructuring Firms Hit by the COVID-19 Crisis

79 Pages Posted: 24 Apr 2024

See all articles by Emanuel Kopp

Emanuel Kopp

International Monetary Fund (IMF)

Juliana Araujo

International Monetary Fund (IMF)

José Garrido

International Monetary Fund (IMF)

Richard Varghese

International Monetary Fund (IMF)

Weijia Yao

International Monetary Fund (IMF)

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

Suggested Citation

Kopp, Emanuel Albin and Araujo, Juliana and Garrido, José and Varghese, Richard and Yao, Weijia, Policy Options for Supporting and Restructuring Firms Hit by the COVID-19 Crisis (February 1, 2022). Available at SSRN: https://ssrn.com/abstract=4804485 or http://dx.doi.org/10.2139/ssrn.4804485

Emanuel Albin Kopp (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Juliana Araujo

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

José Garrido

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Richard Varghese

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Weijia Yao

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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