TY - JOUR
T1 - Supporting small firms through recessions and recoveries
AU - Bonfim, Diana
AU - Custódio, Cláudia
AU - Raposo, Clara
N1 - Funding Information:
Toni Whited was the editor for this article. We thank her and an anonymous referee for excellent guidance through the revision process. We thank Manuel Adelino, Fernando Alexandre, António Antunes, Rui Baptista, Laura Blattner (discussant), Nina Boyarchenko (discussant), Geraldo Cerqueiro, Miguel Cruz, Ralph de Haas, Christopher Hansman, Daniel Ferreira, Miguel Ferreira, Juanita Gonzalez-Uribe (discussant), Hugo Hopenhayn, Isabel Horta Correia, Ivan Ivanov, Fani Kalogirou, Şebnem Kalemli-Özcan (discussant), Nicholas Kozeniauskas, Ana Cristina Leal, Stefano Lugo (discussant), Beatriz Mariano, Adrien Matray, Diogo Mendes, Camelia Minoiu, Klaas Mulier (discussant), Lars Norden, Maria Soledad Martinez Peria, Jean-Stéphane Mésonnier, Matthijs Oosterveen, Daniel Paravisini, Susana Peralta, Kasper Roszbach, Farzad Saidi, André Silva, David Thesmar, João Valle Azevedo, Su Wang, Toni Whited, and conference and seminar participants at the 2nd Annual Conference of the Banca d’Italia, 4th Joint Research Conference on Firm organization, firm financing and firm dynamics, Banco Central de Chile, Banco de Portugal, Bank of Greece, Católica Lisbon, CEMFI, Dansmark Nationalbank, Durham University, EBRD, EFA 2022, European Winter Meeting of the Econometric Society 2021, Federal Reserve Board, FMA 2021, FGV, Goethe University, IBEFA/ASSA 2021, Imperial College, JRC Community of Practice in Financial Research, La Trobe University, LBS Summer Conference, London School of Economics, NBER Summer Institute 2021, Norges Bank, NOVA SBE, Portuguese Economic Journal Conference 2021, 2021 RSM Corporate Finance Day, SFS Cavalcade North America 2021, University of Bath, University of Groningen, and University of Surrey. We thank Bernardo Mendes, Carolina Miguel, Pedro Moreira, and Gonçalo Moreira for excellent research assistance. We thank IAPMEI for discussions on the design and implementation of the program. This paper previously circulated with the title “The sensitivity of small firms’ investment and employment to the cost of debt financing”. These are our views and do not necessarily reflect those of the Bank of Portugal or the Eurosystem. The authors gratefully acknowledge financial support from the Fundação para a Ciência e Tecnologia (Grant PTDC/EGE-OGE/28603/2017) and from the Fundação Francisco Manuel dos Santos. Raposo acknowledges the support of FCT’s grant UIDB/04521/2020. Custódio acknowledges financial support from the European Research Council Grant (Project 852677 - grow).
Funding Information:
Toni Whited was the editor for this article. We thank her and an anonymous referee for excellent guidance through the revision process. We thank Manuel Adelino, Fernando Alexandre, António Antunes, Rui Baptista, Laura Blattner (discussant), Nina Boyarchenko (discussant), Geraldo Cerqueiro, Miguel Cruz, Ralph de Haas, Christopher Hansman, Daniel Ferreira, Miguel Ferreira, Juanita Gonzalez-Uribe (discussant), Hugo Hopenhayn, Isabel Horta Correia, Ivan Ivanov, Fani Kalogirou, Şebnem Kalemli-Özcan (discussant), Nicholas Kozeniauskas, Ana Cristina Leal, Stefano Lugo (discussant), Beatriz Mariano, Adrien Matray, Diogo Mendes, Camelia Minoiu, Klaas Mulier (discussant), Lars Norden, Maria Soledad Martinez Peria, Jean-Stéphane Mésonnier, Matthijs Oosterveen, Daniel Paravisini, Susana Peralta, Kasper Roszbach, Farzad Saidi, André Silva, David Thesmar, João Valle Azevedo, Su Wang, Toni Whited, and conference and seminar participants at the 2nd Annual Conference of the Banca d'Italia, 4th Joint Research Conference on Firm organization, firm financing and firm dynamics, Banco Central de Chile, Banco de Portugal, Bank of Greece, Católica Lisbon, CEMFI, Dansmark Nationalbank, Durham University, EBRD, EFA 2022, European Winter Meeting of the Econometric Society 2021, Federal Reserve Board, FMA 2021, FGV, Goethe University, IBEFA/ASSA 2021, Imperial College, JRC Community of Practice in Financial Research, La Trobe University, LBS Summer Conference, London School of Economics, NBER Summer Institute 2021, Norges Bank, NOVA SBE, Portuguese Economic Journal Conference 2021, 2021 RSM Corporate Finance Day, SFS Cavalcade North America 2021, University of Bath, University of Groningen, and University of Surrey. We thank Bernardo Mendes, Carolina Miguel, Pedro Moreira, and Gonçalo Moreira for excellent research assistance. We thank IAPMEI for discussions on the design and implementation of the program. This paper previously circulated with the title “The sensitivity of small firms’ investment and employment to the cost of debt financing”. These are our views and do not necessarily reflect those of the Bank of Portugal or the Eurosystem. The authors gratefully acknowledge financial support from the Fundação para a Ciência e Tecnologia (Grant PTDC/EGE-OGE/28603/2017) and from the Fundação Francisco Manuel dos Santos. Raposo acknowledges the support of FCT's grant UIDB/04521/2020. Custódio acknowledges financial support from the European Research Council Grant (Project 852677 - grow).
Publisher Copyright:
© 2023 The Authors
PY - 2023/3
Y1 - 2023/3
N2 - We use variation in the access to a government credit certification program to estimate the financial and real effects of supporting small firms. This program was first implemented during the global financial crisis, but has remained active ever since, allowing us to analyze its effects both during recessions and recoveries. Eligible firms have access to government loan guarantees and a credit quality certification. We estimate real effects using a multidimensional regression discontinuity design. We find that eligible firms borrow more and at lower rates than non-eligible firms, allowing them to increase investment and employment during crises. Industry-level analysis shows reduced productivity heterogeneity in more exposed industries, which is consistent with improved credit allocation. However, when the economy is recovering the effects of the program are less pronounced and centered on the certification component. The cost-per-job in the recovery period is half of the one estimated for the crisis period (5784€ and 11,788€, respectively).
AB - We use variation in the access to a government credit certification program to estimate the financial and real effects of supporting small firms. This program was first implemented during the global financial crisis, but has remained active ever since, allowing us to analyze its effects both during recessions and recoveries. Eligible firms have access to government loan guarantees and a credit quality certification. We estimate real effects using a multidimensional regression discontinuity design. We find that eligible firms borrow more and at lower rates than non-eligible firms, allowing them to increase investment and employment during crises. Industry-level analysis shows reduced productivity heterogeneity in more exposed industries, which is consistent with improved credit allocation. However, when the economy is recovering the effects of the program are less pronounced and centered on the certification component. The cost-per-job in the recovery period is half of the one estimated for the crisis period (5784€ and 11,788€, respectively).
KW - Cost of debt
KW - Credit certification
KW - Credit rating
KW - Investment
KW - Small firms’ financing
UR - http://www.scopus.com/inward/record.url?scp=85147884109&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2023.01.004
DO - 10.1016/j.jfineco.2023.01.004
M3 - Article
AN - SCOPUS:85147884109
SN - 0304-405X
VL - 147
SP - 658
EP - 688
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 3
ER -
