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Insolvency Prospects Among Small-and-Medium-Sized Enterprises in Advanced Economies: Assessment and Policy Options

Author

Listed:
  • Mr. Federico J Diez
  • Mr. Romain A Duval
  • Jiayue Fan
  • Jose M Garrido
  • Sebnem Kalemli-Ozcan
  • Chiara Maggi
  • Maria Soledad Martinez Peria
  • Mr. Nicola Pierri

Abstract

The COVID-19 pandemic has increased insolvency risks, especially among small and medium enterprises (SMEs), which are vastly overrepresented in hard-hit sectors. Without government intervention, even firms that are viable a priori could end up being liquidated—particularly in sectors characterized by labor-intensive technologies, threatening both macroeconomic and social stability. This staff discussion note assesses the impact of the pandemic on SME insolvency risks and policy options to address them. It quantifies the impact of weaker aggregate demand, changes in sectoral consumption patterns, and lockdowns on firm balance sheets and estimates the impact of a range of policy options, for a large sample of SMEs in (mostly) advanced economies.

Suggested Citation

  • Mr. Federico J Diez & Mr. Romain A Duval & Jiayue Fan & Jose M Garrido & Sebnem Kalemli-Ozcan & Chiara Maggi & Maria Soledad Martinez Peria & Mr. Nicola Pierri, 2021. "Insolvency Prospects Among Small-and-Medium-Sized Enterprises in Advanced Economies: Assessment and Policy Options," IMF Staff Discussion Notes 2021/002, International Monetary Fund.
    • Handle: RePEc:imf:imfsdn:2021/002
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    Citations

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    Cited by:

    1. Federico Huneeus & Joseph Kaboski & Mauricio Larrain & Sergio Schmukler & Mario Vera, 2022. "The Distribution of Crisis Credit: Effects on Firm Indebtedness and Aggregate Risk," Working Papers Central Bank of Chile 942, Central Bank of Chile.
    2. Harasztosi, Péter & Maurin, Laurent & Pál, Rozália & Revoltella, Debora & van der Wielen, Wouter, 2022. "Firm-level policy support during the crisis: So far, so good?," International Economics, Elsevier, vol. 171(C), pages 30-48.
    3. Abidi, Nordine & El Herradi, Mehdi & Sakha, Sahra, 2023. "Digitalization and resilience during the COVID-19 pandemic," Telecommunications Policy, Elsevier, vol. 47(4).
    4. Jean-Charles Bricongne & Mathilde Dufouleur, 2024. "Impact of Insolvency Regimes on NPLs: Two Birds in the Bush is Worth One in the Hand," Working papers 953, Banque de France.
    5. Tan, Brandon & Igan, Deniz & Martinez Peria, Maria Soledad & Pierri, Nicola & Presbitero, Andrea F., 2021. "Government intervention and bank markups: Lessons from the global financial crisis for the COVID-19 crisis," Journal of Banking & Finance, Elsevier, vol. 133(C).

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