Firms' participation in the COVID-19 loan programme
Lucas Marc Fuhrer, Marc-Antoine Ramelet and Jörn Tenhofen
COVID-19, loan programme, guarantees, firm behaviour
This paper analyses the determinants of ﬁrm participation in the Swiss COVID-19 loan programme, which aims to bridge ﬁrms' liquidity shortfalls that have resulted from the pandemic. State guaranteed COVID-19 loans are widely used by Swiss ﬁrms, with 20% of all ﬁrms participating, resulting in a sizeable programme of 2.4% of GDP. We use a complete ﬁrm-level dataset to study the determinants of ﬁrm participation. Our results can be summarised as follows. First, participation was largely driven by the exposure of a ﬁrm to lockdown restrictions and to the intensity of the virus in the speciﬁc region. Second, we show that less liquid ﬁrms had a signiﬁcantly higher probability of participating in the programme. Third, we ﬁnd no clear evidence that ﬁrm indebtedness aﬀected participation in the programme and no evidence that pre-existing potential zombie ﬁrms participated more strongly in the loan programme. Fourth, we show that the programme reached younger and smaller ﬁrms, which could be ﬁnancially more vulnerable as they are less likely to obtain outside ﬁnance during a crisis. Overall, we conclude that given its objective, the programme appears to be successful.