Impact of public guarantees on optimal debt levels following the COVID-19 pandemic: efficiency in their allocation

• J. Samuel Baixauli-Soler ^[1] ; Gabriel Lozano-Reina ^[1] ; Susana Álvarez-Díez ^[1] ; Diego Rodríguez-Linares Rey ^[1]
  1. [1] Universidad de Murcia

     Universidad de Murcia

     Murcia, España

     
• Localización: Revista española de financiación y contabilidad, ISSN 0210-2412, Vol. 53, Nº 2, 2024, págs. 176-202
• Idioma: inglés
• DOI: 10.1080/02102412.2023.2177460
• Texto completo no disponible (Saber más ...)
• Resumen

  • The COVID-19 pandemic triggered a sudden drop in companies’ sales and turnover, which resulted in serious liquidity and solvency problems. In an effort to cushion these unfavourable effects, a credit guarantee plan was launched in 2020 by the Spanish Government to mitigate the effects of COVID-19 by injecting firms with liquidity. This paper seeks to analyse the impact of this public policy on SMEs’ optimal debt levels and to examine whether the allocation of this public funding has been efficiently targeted at those SMEs suffering temporary distress as a result of the pandemic. Based on a sample of 3,305 Spanish SMEs, our results show that the government’s interventionist policy swelled excess debt levels – mainly due to the increase in excess long-term debt – and deviated them from the optimum. Moreover, although these public guarantees should mostly have been aimed at SMEs experiencing a temporary decline due to COVID-19, we find that these SMEs were the least likely to receive liquidity injections.

• Referencias bibliográficas
  • Abu Hatab, A., Lagerkvist, C. J., & Esmat, A. (2021). Risk perception and determinants in small- and medium-sized agri-food enterprises...
  • Almeida, H. (2021). Liquidity management during the Covid-19 pandemic. Asia-Pacific Journal of Financial Studies, 50(1), 7–24. https://doi.org/10.1111/ajfs.12322
  • Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate Bankruptcy. The Journal of Finance, 23(4), 589–609....
  • Altman, E. I., & Sabato, G. (2007). Modelling credit risk for SMEs: Evidence from the U.S. market. Abacus, 43(3), 332–357. https://doi.org/10.1111/j.1467-6281.2007.00234.x
  • Apergis, N., Danuletiu, D., & Xu, B. (2022). CDS spreads and COVID-19 pandemic. Journal of International Financial Markets, Institutions...
  • Ashley, A. S., & Yang, S. S. M. (2004). Executive compensation and earnings persistence. Journal of Business Ethics, 50(4), 369–382. https://doi.org/10.1023/B:BUSI.0000025031.81884.ed
  • Aybar-Arias, C., Casino-Martinez, A., & Lopez-Gracia, J. (2012). On the adjustment speed of SMEs to their optimal capital structure. Small...
  • Ayotte, K., Hotchkiss, E. S., & Thorburn, K. S. (2013). Governance in financial distress and bankruptcy. In M. Wright, D. S. Siegel, K....
  • Baily, M. N., Bartelsman, E. J., & Haltiwanger, J. (2001). Labor productivity: Structural change and cyclical dynamics. The Review of...
  • Balgati, B. (2001). Economic analysis of panel data. Wiley.
  • Baum, C. F., Schaffer, M. E., & Stillman, S. (2003). Instrumental variables and GMM: Estimation and testing. The Stata Journal, 3(1),...
  • Belghitar, Y., & Khan, J. (2013). Governance mechanisms, investment opportunity set and SMEs cash holdings. Small Business Economics,...
  • Belghitar, Y., Moro, A., & Radic, N. (2022). When the rainy day is the worst hurricane ever: The effects of governmental policies on SMEs...
  • Blanco, R., Mayordomo, S., Menéndez, Á., & Mulino, M. (2021). Impact of the COVID-19 crisis on Spanish firms’ financial vulnerability....
  • Cabrera, D. (2022). La “bomba” de los ICO: el Gobierno no conocerá hasta septiembre la morosidad real. https://www.vozpopuli.com/economia_y_finanzas/banco-de-espana-ico-sept.html
  • Carvalho, D. (2014). The real effects of government-owned Banks: Evidence from an emerging market. The Journal of Finance, 69(2), 577–609....
  • Chen, D., Li, L., Liu, X., & Lobo, G. J. (2018). Social trust and auditor reporting conservatism. Journal of Business Ethics, 153(4),...
  • Chu, Y. (2017). Shareholder litigation, shareholder–creditor conflict, and the cost of bank loans. Journal of Corporate Finance, 45, 318–332....
  • Cordella, T., Dell’ariccia, G., & Marquez, R. (2018). Government guarantees, transparency, and bank risk taking. IMF Economic Review,...
  • Core, F., & De Marco, F. (2021). Public guarantees for small businesses in Italy during COVID-19 (CEPR Discussion Paper No. DP15799)....
  • Corredera-Catalán, F., diPietro, F., & Trujillo-Ponce, A. (2021). Post-COVID-19 SME financing constraints and the credit guarantee scheme...
  • Cressy, R. (2006). Determinants of small firms survival and growth. In M. Casson, B. Yeung, A. Basu, & N. Wadeson (Eds.), The Oxford Handbook...
  • D’amato, A. (2020). Capital structure, debt maturity, and financial crisis: Empirical evidence from SMEs. Small Business Economics, 55(4),...
  • Dammon, R. M., & Senbet, L. W. (1988). The effect of taxes and depreciation on corporate investment and financial leverage. The Journal...
  • Demmou, L., Franco, G., Calligaris, S., & Dlugosch, D. (2021). Liquidity shortfalls during the COVID-19 outbreak: Assessment and policy...
  • Dolz, C., Iborra, M., & Safón, V. (2019). Improving the likelihood of SME survival during financial and economic crises: The importance...
  • Elnahass, M., Trinh, V. Q., & Li, T. (2021). Global banking stability in the shadow of Covid-19 outbreak. Journal of International Financial...
  • Fairlie, R., & Fossen, F. M. (2022). The early impacts of the COVID-19 pandemic on business sales. Small Business Economics, 58(4), 1853–1864....
  • Fama, E., & French, K. (2002). Testing trade-off and pecking order predictions about dividends and debt. The Review of Financial Studies,...
  • Gazaniol, A., & Lê, M. (2021). The impact of public loan guarantees on banks’ risk taking and firms’ growth: Evidence from France. Economie...
  • Ghosal, V., & Ye, Y. (2015). Uncertainty and the employment dynamics of small and large businesses. Small Business Economics, 44(3), 529–558....
  • Gormsen, N. J., & Koijen, R. S. J. (2020). Coronavirus: Impact on stock prices and growth expectations. The Review of Asset Pricing Studies,...
  • Gropp, R., Gruendl, C., & Guettler, A. (2014). The impact of public guarantees on bank risk-taking: Evidence from a natural experiment....
  • Hansen, L. P. (1982). Large sample properties of generalized-method of moments estimators. Econometrica, 50(4), 1029–1054. https://doi.org/10.2307/1912775
  • He, Q., Liu, J., Wang, S., & Yu, J. (2020). The impact of COVID-19 on stock markets. Economic and Political Studies, 8(3), 275–288. https://doi.org/10.1080/20954816.2020.1757570
  • Hovakimian, A., Opler, T., & Titman, S. (2001). The debt-equity choice. The Journal of Financial and Quantitative Analysis, 36(1), 1–24....
  • Kahn, C. M., & Wagner, W. (2021). Liquidity provision during a pandemic. Journal of Banking & Finance, 133, 106152. https://doi.org/10.1016/j.jbankfin.2021.106152
  • Khwaja, A., & Mian, A. (2005). Do lenders favor politically connected firms? Rent provision in an emerging financial market. The Quarterly...
  • Lagazio, C., Persico, L., & Querci, F. (2021). Public guarantees to SME lending: Do broader eligibility criteria pay off? Journal of Banking...
  • Leonello, A. (2018). Government guarantees and the two-way feedback between banking and sovereign debt crises. Journal of Financial Economics,...
  • Lopez-Gracia, J., & Mestre-Barbera, R. (2011). Tax effect on Spanish SME optimum debt maturity structure. Journal of Business Research,...
  • Lopez-Gracia, J., & Sogorb-Mira, F. (2008). Testing trade-off and pecking order theories financing SMEs. Small Business Economics, 31(2),...
  • Lu, Y., Wu, J., Peng, J., & Lu, L. (2020). The perceived impact of the Covid-19 epidemic: Evidence from a sample of 4807 SMEs in Sichuan...
  • Macan Bhaird, C., & Lucey, B. (2010). Determinants of capital structure in Irish SMEs. Small Business Economics, 35(3), 357–375. https://doi.org/10.1007/s11187-008-9162-6
  • McGuinness, G., Hogan, T., & Powell, R. (2018). European trade credit use and SME survival. Journal of Corporate Finance, 49, 81–103....
  • Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5(2), 147–175. https://doi.org/10.1016/0304-405X(77)90015-0
  • Nadeem, M. (2022). Board gender diversity and managerial obfuscation: Evidence from the readability of narrative disclosure in 10-K reports....
  • Padhan, R., & Prabheesh, K. P. (2021). The economics of COVID-19 pandemic: A survey. Economic Analysis and Policy, 70, 220–237. https://doi.org/10.1016/j.eap.2021.02.012
  • Sapienza, P. (2004). The effects of government ownership on bank lending. Journal of Financial Economics, 72(2), 357–384. https://doi.org/10.1016/j.jfineco.2002.10.002
  • Sarker, M. R., Rahman, S. M. A., Islam, A., Bhuyan, M. F. F., Supra, S. E., Ali, K., & Noor, K. M. A. (2022). Impact of COVID-19 on Small-...
  • Serrasqueiro, Z., Nunes, P. M., & da Silva, J. V. (2012). Are financing decisions of family-owned SMEs different? Empirical evidence using...
  • Sun, Y., Zeng, X., Zhao, H., Simkins, B., & Cui, X. (2022). The impact of COVID-19 on SMEs in China: Textual analysis and empirical evidence....
  • Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. The Journal of Finance, 43(1), 1–19. https://doi.org/10.1111/j.1540-6261.1988.tb02585.x
  • Wald, J. K. (1999). How firm characteristics affect capital structure: An international comparison. Journal of Financial Research, 22(2),...
  • Wang, Y. (2016). What are the biggest obstacles to growth of SMEs in developing countries? Anempirical evidence from an enterprise survey....
  • Wiggins, J. B. (1990). The Relation between risk and optimal debt maturity and the value of leverage. The Journal of Financial and Quantitative...
  • Zecchini, S., & Ventura, M. (2009). The impact of public guarantees on credit to SMEs. Small Business Economics, 32(2), 191–206. https://doi.org/10.1007/s11187-007-9077-7
  • Zhang, D., & Zheng, W. (2022). Does COVID-19 make the firms’ performance worse? Evidence from the Chinese listed companies. Economic Analysis...
  • Zhu, W., Zhang, P., Li, P., & Wang, Z. (2020). Firm crisis, government support and policyefficiency under the epidemic shock: Evidence...