Indirect Costs of Government Aid and Intermediary Supply Effects: Lessons From the Paycheck Protection Program

Did the paycheck protection program hit the target?

“…Our paper contributes directly to this literature by showing how policy transmission depends on the agents delegated to deploy it (e.g., banks). These results are consistent with those of studies that emphasize the importance of proximity (Granja, Leuz and Rajan, 2018), as well as emerging evidence from the pandemic that firms with pre-existing borrowing and lending relationships received access to PPP funds faster than their counterparts (Balyuk, Prabhala and Puri, 2020;Amiram and Rabetti, 2020;Li and Strahan, 2020).…”

“…In our main analysis, we use the PPPE measure of relative bank performance that is based on the share of the number of PPP and SBL loans of each bank. 13 We prefer the number-based measure of relative bank performance because larger businesses had prompter access to PPP loans (Balyuk, Prabhala and Puri, 2020) and the volume-based measure of bank performance puts greater weight on large loans and less weight on smaller loans to businesses whose access to the program was more likely constrained by lack of local access to commercial banks that were quick to deploy loans.…”

Who Supplies PPP Loans (and Does It Matter)? Banks, Relationships, and the COVID Crisis

“…Amiram and Rabetti (2020) focus on publicly traded firms and find that firms with existing banking relationships receive larger PPP loans faster. Balyuk, Prabhala, and Puri (2020) study small public firms and find benefits associated with access to PPP credit. Cororaton and Rosen (2020) also study publicly traded firms and find that smaller public firms with more employees, fewer investment opportunities, and COVID-19 exposure are more likely to borrow from PPP funds.…”

“…Erel and Liebersohn (2020) find that borrowers in areas with fewer bank branches, lower incomes, and more minority populations are more likely to access PPP funds via financial technology (fintech) firms rather than banks. 6 A number of studies show that small community banks provide an outsized share of PPP loans (Balyuk et al (2020), Faulkender et al (2020), and James, Lu, and Sun (2020). Bartik, Cullen, Glaeser, Luca, Stanton, Sunderam (2020) use firm survey evidence, finding that firms with strong bank relationships are more likely to receive PPP loans, whereas Joaquim and Netto (2020) provide a theoretical analysis of bank incentives to lend under the program.…”

Who Supplies PPP Loans (And Does It Matter)? Banks, Relationships and the COVID Crisis

“…Erel and Liebersohn (2020) find that borrowers in areas with fewer bank branches, lower incomes, and more minority population are more likely to access PPP via FinTech firms rather than banks. A number of studies show that small, community banks provide an outsized share of PPP loans (Balyuk (2020), Faulkender et al (2020, James et al (2020)). Bartik et al (2020) use firm survey evidence, finding that firms with strong bank relationship are more likely to receive PPP loans, while Joaquim and Netto (2020) provide a theoretical analysis of bank incentives to lend under the program.…”