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Sizing Up Corporate Restructuring in the COVID-19 Crisis

Author

Listed:
  • Robin Greenwood

    (Harvard University)

  • Ben Iverson

    (Brigham Young University)

  • David Thesmar

    (Massachusetts Institute of Technology)

Abstract

In the wake of the COVID-19 pandemic, the financial and legal system will need to deal with a surge of financial distress in the business sector. Some firms will be able to survive, while others will face bankruptcy and thus need to be liquidated or reorganized. Many surviving firms will need to be downsized or acquired. In normal times, this triage is supported by the court system, banks, and financial markets. The goal of this paper is to size up the coming surge of financial distress, list the challenges it presents in the current environment, and offer potential policy solutions. Overall, our analysis suggests that the two key issues will be court congestion and excess liquidation and failure of small firms.

Suggested Citation

  • Robin Greenwood & Ben Iverson & David Thesmar, 2020. "Sizing Up Corporate Restructuring in the COVID-19 Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 51(3 (Fall)), pages 391-441.
    • Handle: RePEc:bin:bpeajo:v:51:y:2020:i:2020-03:p:391-441
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    File URL: https://www.brookings.edu/articles/sizing-up-corporate-restructuring-in-the-covid-crisis/
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    Keywords

    COVID-19; small firm; corporate;
    All these keywords.

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