DP15323 COVID-19 and SME Failures

Author(s): Pierre-Olivier Gourinchas, Sebnem Kalemli-Ozcan, Veronika Penciakova, Nick Sander
Publication Date: May 2021
Date Revised: May 2021
Keyword(s): bankruptcy, business failure, COVID-19, SMEs
JEL(s):
Programme Areas: International Macroeconomics and Finance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15323

We estimate the impact of COVID-19 on business failures for small and medium sized enterprises (SMEs) using firm-level data in seventeen countries. Absent government support, the failure rate of SMEs would have increased by 9.1 percentage points, representing 4.6 percent of private sector employment. Resulting non-performing loans are modest, decreasing the risk-weighted common equity Tier-1 capital ratio from 14.1 to 12 percent. Government support limited to "at-risk" firms would have low fiscal costs (0.8% of GDP). Less targeted policies such as government guaranteed loans are similarly effective, but substantially more expensive, with disbursed funds representing up to 5.8% of GDP