IDEAS home Printed from https://ideas.repec.org/p/hal/spmain/hal-03981175.html
   My bibliography  Save this paper

Firms’ financial vulnerabilities during COVID-19: Was the French support package too generous ?

Author

Listed:
  • Sarah Guillou

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Karsten Mau

    (Maastricht University [Maastricht])

  • Tania Treibich

    (Maastricht University [Maastricht], OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

We exploit detailed and comprehensive data from France, combining firms' balance sheet information and trade records, to uncover the role of firm characteristics in their exposure to the COVID-19 pandemic. Next, we study the impact of three governmental support policies on firms' liquidity position in 2020: the wage subsidy scheme (AP), the solidarity fund (FSE) and the loan guarantee (PGE). We highlight four dimensions of heterogeneity for policy efficiency in our analysis: the type of liquidity shock, sector and size groups and labor productivity deciles. Our microsimulation exercise shows that aggregate policy support matches very well total liquidity losses. Yet, the compensation scheme was not perfect as these aggregate figures hide heterogeneous policy efficiency across firms and policies. Nearly one fourth of firms were over-compensated, which allowed them to improve their liquidity position, but those that suffered the highest liquidity losses did not receive enough support. Our simulation shows that 7.4 billion (bn) euros of subsidies were given to firms in excess of their liquidity loss. The share of overcompensated firms rises to 39% when we account for the guaranteed loans. We locate them mostly in the wholesale and retail, manufacturing and culture and leisure sectors. Yet, most firms were not fully compensated. This was especially the case for those that became illiquid in 2020, very large firms, highly productive firms, and firms in the hospitality and construction sectors.

Suggested Citation

  • Sarah Guillou & Karsten Mau & Tania Treibich, 2023. "Firms’ financial vulnerabilities during COVID-19: Was the French support package too generous ?," SciencePo Working papers Main hal-03981175, HAL.
    • Handle: RePEc:hal:spmain:hal-03981175
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03981175
    as

    Download full text from publisher

    File URL: https://sciencespo.hal.science/hal-03981175/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mattia Guerini & Lionel Nesta & Xavier Ragot & Stefano Schiavo, 2020. "Dynamique des défaillances d’entreprises en France et crise de la Covid-19," Post-Print hal-03043893, HAL.
    2. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 33-60.
    3. Lilas Demmou & Guido Franco & Sara Calligaris & Dennis Dlugosch, 2022. "Liquidity Shortfalls during the COVID 19 Outbreak: Assessment and Policy Responses," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 532-33, pages 47-61.
    4. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65, Elsevier.
    5. repec:hal:spmain:info:hdl:2441/rkjmj2efu9p9odkg4qihv3clh is not listed on IDEAS
    6. Esposito, Federico, 2022. "Demand risk and diversification through international trade," Journal of International Economics, Elsevier, vol. 135(C).
    7. Mattia Guerini & Lionel Nesta & Xavier Ragot & Stefano Schiavo, 2020. "Dynamique des défaillances d’entreprises en France et crise de la Covid-19," Post-Print hal-03043893, HAL.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fabio Bertoni & María Ferrer & José Martí, 2013. "The different roles played by venture capital and private equity investors on the investment activity of their portfolio firms," Small Business Economics, Springer, vol. 40(3), pages 607-633, April.
    2. Jean-Bernard Chatelain, 2003. "Structural modelling of financial constraints on investment: where do we stand?," Chapters, in: Paul Butzen & Catherine Fuss (ed.), Firms’ Investment and Finance Decisions, chapter 2, pages 40-58, Edward Elgar Publishing.
    3. Beck, Thorsten & Demirguc-Kunt, Asli & Laeven, Luc & Maksimovic, Vojislav, 2006. "The determinants of financing obstacles," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 932-952, October.
    4. MORIKAWA Masayuki, 2012. "Financial Constraints in Intangible Investments: Evidence from Japanese firms," Discussion papers 12045, Research Institute of Economy, Trade and Industry (RIETI).
    5. Emilia Bonaccorsi di Patti & Giorgio Gobbi, 2003. "The effects of bank mergers on credit availability: evidence from corporate data," Temi di discussione (Economic working papers) 479, Bank of Italy, Economic Research and International Relations Area.
    6. Oksanen, Olli-Pekka, 2006. "Are Foreign Investments Replacing Domestic Investments? - Evidence from Finnish Manufacturing," Discussion Papers 1001, The Research Institute of the Finnish Economy.
    7. Vijayakumaran, Ratnam, 2021. "Impact of managerial ownership on investment and liquidity constraints: Evidence from Chinese listed companies," Research in International Business and Finance, Elsevier, vol. 55(C).
    8. Günay, Hüseyin & Kılınç, Mustafa, 2015. "Credit market imperfections and business cycle asymmetries in Turkey," Journal of Empirical Finance, Elsevier, vol. 34(C), pages 79-98.
    9. Vlieghe, Gertjan & Stephen Bond & Alexander Klemm & Rain Newton-Smith & Murtaza Syed, 2003. "The roles of expected profitability, Tobin's Q and cash flow in econometric models of company investment," Royal Economic Society Annual Conference 2003 212, Royal Economic Society.
    10. Bhaduri, Saumitra N., 2005. "Investment, financial constraints and financial liberalization: Some stylized facts from a developing economy, India," Journal of Asian Economics, Elsevier, vol. 16(4), pages 704-718, August.
    11. Sevcan Yesiltas, 2009. "Financing Constraints and Investment: The Case of Turkish Manufacturing Firms," 2009 Meeting Papers 874, Society for Economic Dynamics.
    12. Coad, Alex, 2010. "Neoclassical vs evolutionary theories of financial constraints: Critique and prospectus," Structural Change and Economic Dynamics, Elsevier, vol. 21(3), pages 206-218, August.
    13. Manzur Quader & Karl Taylor, 2018. "Corporate efficiency, credit status and investment," The European Journal of Finance, Taylor & Francis Journals, vol. 24(6), pages 439-457, April.
    14. Ignacio Hernando & André Tiomo, 2002. "Financial constraints and investment in France and Spain: a comparison using firm level data," Working Papers 0214, Banco de España.
    15. Reyes, Alvaro & Lensink, Robert & Kuyvenhoven, Arie & Moll, Henk, 2012. "Dynamics of Investment for Market-Oriented Farmers in Chile," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126218, International Association of Agricultural Economists.
    16. NGEPAH, NICHOLAS & EITA , JOEL HINAUNYE & BIYASE , MDUDUZI & Saba, Charles, 2023. "The Effect of Transnet's Capital Expenditure and Investment in Various other Selected Sectors of the South African Economy," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(1), pages 65-90.
    17. Bassetto, Camila F. & Kalatzis, Aquiles E.G., 2011. "Financial distress, financial constraint and investment decision: Evidence from Brazil," Economic Modelling, Elsevier, vol. 28(1-2), pages 264-271, January.
    18. repec:ebl:ecbull:v:5:y:2007:i:12:p:1-12 is not listed on IDEAS
    19. Hang (Robin) Luo & Abu Reza Mohammad Islam & Rui Wang, 2021. "Financing Constraints and Investment Efficiency in Canadian Real Estate and Construction Firms: A Stochastic Frontier Analysis," SAGE Open, , vol. 11(3), pages 21582440211, July.
    20. Timothy Erickson & Toni M. Whited, 2000. "Measurement Error and the Relationship between Investment and q," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 1027-1057, October.
    21. Philip Arestis & Malcolm Sawyer, 2004. "On the Effectiveness of Monetary Policy and of Fiscal Policy," Review of Social Economy, Taylor & Francis Journals, vol. 62(4), pages 441-463.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:spmain:hal-03981175. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Contact - Sciences Po Departement of Economics (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.