Working Paper: NBER ID: w28114
Authors: Tetyana Balyuk; Nagpurnanand R. Prabhala; Manju Puri
Abstract: The $669 billion Paycheck Protection Program (PPP) provides highly subsidized financing to small businesses. The PPP is a positive shock in financing supply to the small, highly constrained publicly listed firms in our sample and has average positive treatment effects. Yet, uptake is not universal. In fact, several firms return PPP funds before use, and curiously, experience positive valuation effects when they do so. These firms desire and the markets value the release from government oversight even if it means giving up cheap funding. The PPP is also a demand shock to the banks making PPP loans. Intermediary supply effects shape PPP delivery. Larger borrowers enjoy earlier PPP access, an effect that is more pronounced in big banks. The results have implications for policy design, the costs of being public, and bank-firm relationships.
Keywords: Paycheck Protection Program; government aid; small businesses; indirect costs; bank lending
JEL Codes: E61; G32; G38; H81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Paycheck Protection Program (PPP) (H81) | financing supply (G32) |
| Paycheck Protection Program (PPP) (H81) | firm value (G32) |
| returning PPP funds (H81) | firm value (G32) |
| size of borrower (G21) | early access to PPP funds (H81) |
| bank type (G21) | early access to PPP funds (H81) |
| returning PPP funds (H81) | release from government oversight (G18) |