Distribution of COVID-19 government support and its consequences for firm liquidity and solvency

Lalinsky, Tibor; Pál, Rozália

doi:10.1016/j.strueco.2022.03.008

Cited by 25 publications

(17 citation statements)

References 6 publications

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“…The literature has highlighted how governmental policies may attenuate the harmful effects of economic shocks. In the case of the COVID shock, Lalinsky and P al (2022) find that Slovak firms receiving governmental wage subsidies decreased their probability of illiquidity and insolvency. Finally, for European firms and using European Investment Bank Investment Survey (EIBIS) database, Harasztosi et al (2022) find that policy support during COVID-19 was generally allocated to firms that were the most affected by the crisis.…”

Section: 2mentioning

confidence: 93%

From rapid decline to high growth: where in the distribution did COVID hit hardest?

Coad

Bauer

Domnick

et al. 2023

JSBED

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PurposeThe authors explore how did the COVID shock hit European firms at the upper quantiles (high-growth superstars) and the lower quantiles (rapidly declining firms).Design/methodology/approachThe authors analyze the European Investment Bank Investment Survey (2016–2020). This exploratory paper applies graphical techniques and quantile regression to evaluate the COVID shock along the growth rates distribution.FindingsRegarding growth of sales and growth of value added, COVID had a negative effect on growth across the growth rates distribution. The negative COVID effect is larger at the lower quantiles. Employment growth shows no effect for many firms that have zero employment growth, but at the extreme quantiles, the authors can observe that some declining firms were adversely affected by COVID. For labour productivity growth, the COVID effect is small. Analysis of subsamples, and quantile regressions with interaction terms, emphasize that firms receiving policy support were relatively strongly affected by COVID, consistent with interpretations that COVID policy support was reaching the intended recipients. Finally, fully digitalized firms may have been somewhat shielded from the harmful effects of COVID.Originality/valueFirst, previous studies have focused on the average effect of COVID on the growth performance. Our research contributes to understanding how the COVID shock affected the entire growth rates distribution, ranging to high-growth firms and declining firms. Second, governments devoted financial support to firms. Our analysis explores if COVID policy support was given to companies more affected by this shock. Third, previous digitalization may have boosted resilience by shielding firms from COVID’s harmful effects on firm growth.

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Section: 2mentioning

confidence: 93%

From rapid decline to high growth: where in the distribution did COVID hit hardest?

Coad

Bauer

Domnick

et al. 2023

JSBED

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show abstract

“…Apart from that, government subsidies help coordinate behaviors between suppliers and the government to avoid harming consumers through price and quantity changes [ 23 ]. The impact of government subsidies on retailers' profits depends on the scale (Meng et al, 2021), and during the COVID-19 pandemic, subsidies have helped mitigate the negative impact on corporate profits [ 36 ]. For low-margin products, government intervention may be necessary to cover the risk of market changes, while for high-profit products, suppliers bear the risk [ 23 ].…”

Section: Literature and Research Hypothesesmentioning

confidence: 99%

Is the government’s direct subsidy to COVID-19 effective?

Zhou¹,

Mei²,

Li³

2023

Heliyon

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“…This incessant borrowing behavior has been observed in South Korea, albeit with some caution (Hyun, 2022). Although lenders in a few countries have been cautious because the external shock from the pandemic is large, and its quantum is still being computed, a fair chance exists for zombification (Lalinsky & Pa´l, 2022).…”

Section: Findings From Literaturementioning

confidence: 99%

Surviving beyond expiry: a systematic literature review of zombie firms

Upadhyay,

Baag

2023

CAFR

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PurposeThis paper reviews the literature on zombie firms to provide a holistic view by delineating their formation, impact, widespread nature, prevention and policy implications.Design/methodology/approachThis paper uses a systematic literature review methodology, in which 76 papers published in journals ranked on the Australian Business Deans Council (ABDC) 2022 list were reviewed. The study period was from 2000 to 2022.FindingsAmong the main findings, the widespread problems of zombie firms were evident. The authors found that consistent support, either in the form of government grants or a weak financial framework, was responsible for their formation. The suboptimal performance of factors of production, depressed job creation, low innovation and overall negative impact on economic activity are the consequences of zombification. This can be controlled by ensuring better bankruptcy codes, focused on government assistance, technology use and better due diligence by banks.Practical implicationsThis review serves as a reference point for future researchers as a cohesive and holistic study presenting a full picture of the problem, so that the proposed solutions are robust and tenable.Originality/valueThis review is among the initial attempts to comprehensively study published work on zombie firms in terms of analyzing their region-specific nature, with an emphasis on definition, causes, impact and prevention.

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Distribution of COVID-19 government support and its consequences for firm liquidity and solvency

Cited by 25 publications

References 6 publications

From rapid decline to high growth: where in the distribution did COVID hit hardest?

From rapid decline to high growth: where in the distribution did COVID hit hardest?

Is the government’s direct subsidy to COVID-19 effective?

Surviving beyond expiry: a systematic literature review of zombie firms

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