Fraud and abuse in the paycheck protection program? Evidence from investment advisory firms

Beggs, William; Harvison, Thuong

doi:10.1016/j.jbankfin.2022.106444

Cited by 7 publications

(4 citation statements)

References 13 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Much of this literature examines its impact on employment and business survival, with some evidence that it boosted both outcomes but debate over magnitudes (Hubbard and Strain, 2020;Autor et al, 2020;Granja et al, 2020;Chetty et al, 2020); as well as on appropriate targeting, with evidence that larger firms were better able to access the program (Bartik et al, 2020;Humphries et al, 2020;Balyuk et al, 2021). Our paper is most closely related to two studies that examine fraud in the PPP, with Griffin et al (2021) suggesting that FinTech lenders were responsible for much of this fraud, while Beggs and Harvison (2021) find that 6% of PPP funds that went to investment management firms likely consisted of overallocations. Our paper corroborates much of these two papers' findings about systemic fraud, while highlighting the importance of institutional design.…”

Section: Scopementioning

confidence: 55%

Screen Now, Save Later? The Trade-Off between Administrative Ordeals and Fraud

Aman-Rana

Gingerich

Sukhtankar

2022

Preprint

View full text Add to dashboard Cite

Screening requirements are common features of fraud and corruption mitigation efforts around the world. Yet imposing these requirements involves trade-offs between higher administrative costs, delayed benefits, and exclusion of genuine beneficiaries on one hand and lower fraud on the other. We examine these trade-offs in one of the largest economic relief programs in US history: The Paycheck Protection Program (PPP). Employing a database that includes nearly 11.5 million PPP loans, we assess the impact of screening by exploiting temporal variation in the documentation standards applied to loan applications for loans of different values. We find that screening significantly reduced the incidence and magnitude of various measures of loan irregularities that are indicative of fraud. Moreover, our analysis reveals that a subset of borrowers with a checkered history strategically reduced their loan application amounts in order to avoid being subjected to screening.

show abstract

Section: Scopementioning

confidence: 55%

Screen Now, Save Later? The Trade-Off between Administrative Ordeals and Fraud

Aman-Rana

Gingerich

Sukhtankar

2022

Preprint

View full text Add to dashboard Cite

show abstract

“…Observations were also incorrectly coded into the population of interest (e.g., several wineries and distilleries were coded as breweries when each has its own NAICS code). Moreover, Beggs and Harvison (2022) and Griffin et al (2022) suggest that the loan program was susceptible to fraudulent claims, implying that researchers must be aware of their potential presence in the data. By addressing shortcomings related to the 30 Given the number of craft breweries in the USA, the manual matching procedures described in this study were practical.…”

Section: Discussionmentioning

confidence: 99%

“…This includes discussing the limitations of the North American Industry Classification System (NAICS) coding system and inconsistencies in the PPP data. Furthermore, evidence suggests that the loan program was subject to fraudulent claims (Beggs & Harvison, 2022;Griffin et al, 2022), making it difficult for researchers to address the economic contribution of the PPP. By anchoring the PPP database to a verified listing of firms at the industry level, the study provides an important advancement that significantly reduces concerns over fraudulent claims being included in the analysis.…”

Section: Introductionmentioning

confidence: 99%

The Paycheck Protection Program and small business performance: Evidence from craft breweries

Staples

Krumel

2022

Small Bus Econ

View full text Add to dashboard Cite

The Paycheck Protection Program (PPP) provided approximately US $790 billion in COVID-19 relief funds to small businesses across the United States. This study merges a verified industry dataset of craft beer producers with government microdata on PPP loan recipients to examine the relationship between PPP funding and small business performance during the pandemic. Results indicate that firms receiving PPP funding were more likely to remain in operation and experience a smaller decline in annual production. However, even within a single industry, COVID-19 had heterogeneous effects on different market segments, demonstrating the importance of a firm’s pre-pandemic business model on its flexibility and resiliency during a crisis. Finally, using a quasi-experiment that exploits a natural break in the loan program, the study suggests a positive causal effect of the role of loan approval timing on short-run performance outcomes. These findings provide evidence that the PPP alleviated some losses induced by COVID-19, but questions remain about the program’s distribution and long-term impacts. Plain English Summary The US federal government created the Paycheck Protection Program (PPP) to minimize the economic damages from COVID-19 on workers and small businesses. One industry hit particularly hard by the pandemic was the craft brewing industry, making it an ideal industry to explore whether the PPP achieved its objectives. The results show that receiving a PPP loan increased the likelihood of remaining in business through the pandemic. Additionally, while most craft breweries experienced a decline in annual production from 2019 to 2020, firms that received a PPP loan experienced a smaller reduction. Breweries that received the earliest funding also performed better, suggesting that loan timing played a key role in performance outcomes. Taken together, the study suggests that the government program helped reduce economic damages associated with COVID-19, but more work is needed to fully understand the program’s impact. Supplementary Information The online version contains supplementary material available at 10.1007/s11187-022-00717-3.

show abstract

“…Our findings also have important practical implications regarding the extent and nature of PPP misreporting, the expanding role of FinTech lending, waste in the PPP, the proliferation of fictitious lending, and the insufficient 4 Concerns about PPP fraud have been flagged by the Office of the Inspector General for the SBA (see report at https://www.sba.gov/sites/default/files/2021-01/SBA%20OIG%20Report-21-07.pdf). Beggs and Harvison (2022) find that among the 2,999 registered investment advisors who took PPP loans, those with a history of financial misconduct received unusually large PPP loan allocations.…”

mentioning

confidence: 91%

Did FinTech Lenders Facilitate PPP Fraud?

Griffin¹,

Kruger²,

MAHAJAN

2023

The Journal of Finance

View full text Add to dashboard Cite

In the $793 billion Paycheck Protection Program, we examine metrics related to potential misreporting including nonregistered businesses, multiple businesses at residential addresses, abnormally high implied compensation per employee, and large inconsistencies with jobs reported in another government program. These measures consistently concentrate in certain FinTech lenders and are cross-verified by seven additional measures. FinTech market share increased significantly over time, and suspicious lending by FinTechs in 2021 is four times the level at the start of the program. Suspicious loans are being overwhelmingly forgiven at rates similar to other loans. THE MELDING OF FINANCIAL TECHNOLOGY and banking, also known as Fin-Tech lending, has emerged at a rapid pace in the aftermath of the financial crisis. Buchak et al. (2018) find that an increase in regulatory burdens for

show abstract

Fraud and abuse in the paycheck protection program? Evidence from investment advisory firms

Cited by 7 publications

References 13 publications

Screen Now, Save Later? The Trade-Off between Administrative Ordeals and Fraud

Screen Now, Save Later? The Trade-Off between Administrative Ordeals and Fraud

The Paycheck Protection Program and small business performance: Evidence from craft breweries

Did FinTech Lenders Facilitate PPP Fraud?

Contact Info

Product

Resources

About