Public Firm Borrowers of the U.S. Paycheck Protection Program
Review of Corporate Finance Studies (2021)
64 Pages Posted: 3 May 2020 Last revised: 8 Dec 2021
Date Written: April 30, 2020
We document that nearly half of US public firms were eligible for the Paycheck Protection Program (PPP) in 2020, with 41.8% of those eligible choosing to borrow. Consistent with the program's objectives, borrowers tended to be smaller with less cash, higher leverage, and fewer investment opportunities. In addition, firm values declined upon PPP loan announcement and borrowers grew slower in 2020 relative to nonborrowers. We document that 13.5% of PPP borrowers, in particular those facing more public scrutiny, returned their loans after public backlash. Overall, concerns of reputational harm appeared to dissuade eligible public firms from availing emergency government funding.
Keywords: CARES Act, SBA, government emergency policy, firm reputation
JEL Classification: E61, E65, G38, H81
Suggested Citation: Suggested Citation