Financing Firms in Hibernation during the COVID-19 Pandemic
The coronavirus (COVID-19) pandemic has halted economic activity worldwide, hurting firms and pushing them toward bankruptcy. This paper provides a unified framework to organize the policy debate related to firm financing during the downturn, cente...
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World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/818801588952012929/Financing-Firms-in-Hibernation-during-the-COVID-19-Pandemic http://hdl.handle.net/10986/33745 |
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okr-10986-337452022-09-20T00:11:59Z Financing Firms in Hibernation during the COVID-19 Pandemic Didier, Tatiana Huneeus, Federico Larrain, Mauricio Schmukler, Sergio L. CORONAVIRUS COVID-19 PANDEMIC RESPONSE SMALL AND MEDIUM SIZE ENTERPRISE CASH CRUSH CREDIT RISK FINANCIAL POLICY ECONOMIC CRISIS BANKRUPTCY ACCESS TO FINANCE The coronavirus (COVID-19) pandemic has halted economic activity worldwide, hurting firms and pushing them toward bankruptcy. This paper provides a unified framework to organize the policy debate related to firm financing during the downturn, centered along four main points. First, the economic crisis triggered by the spread of the virus is radically different from past crises, with important consequences for optimal policy responses. Second, to avoid inefficient bankruptcies and long-term detrimental effects, it is important to preserve firms' relationships with key stakeholders, like workers, suppliers, customers, and creditors. Third, firms can benefit from "hibernating," using the minimum bare cash necessary to withstand the pandemic, while using credit to remain alive until the crisis subdues. Fourth, the existing legal and regulatory infrastructure is ill-equipped to deal with an exogenous systemic shock such as this pandemic. Financial sector policies can help increase the provision of credit, while posing difficult choices and trade-offs. 2020-05-14T14:26:45Z 2020-05-14T14:26:45Z 2020-05 Working Paper http://documents.worldbank.org/curated/en/818801588952012929/Financing-Firms-in-Hibernation-during-the-COVID-19-Pandemic http://hdl.handle.net/10986/33745 English Policy Research Working Paper;No. 9236 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
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Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English |
| topic |
CORONAVIRUS COVID-19 PANDEMIC RESPONSE SMALL AND MEDIUM SIZE ENTERPRISE CASH CRUSH CREDIT RISK FINANCIAL POLICY ECONOMIC CRISIS BANKRUPTCY ACCESS TO FINANCE |
| spellingShingle |
CORONAVIRUS COVID-19 PANDEMIC RESPONSE SMALL AND MEDIUM SIZE ENTERPRISE CASH CRUSH CREDIT RISK FINANCIAL POLICY ECONOMIC CRISIS BANKRUPTCY ACCESS TO FINANCE Didier, Tatiana Huneeus, Federico Larrain, Mauricio Schmukler, Sergio L. Financing Firms in Hibernation during the COVID-19 Pandemic |
| relation |
Policy Research Working Paper;No. 9236 |
| description |
The coronavirus (COVID-19) pandemic has
halted economic activity worldwide, hurting firms and
pushing them toward bankruptcy. This paper provides a
unified framework to organize the policy debate related to
firm financing during the downturn, centered along four main
points. First, the economic crisis triggered by the spread
of the virus is radically different from past crises, with
important consequences for optimal policy responses. Second,
to avoid inefficient bankruptcies and long-term detrimental
effects, it is important to preserve firms'
relationships with key stakeholders, like workers,
suppliers, customers, and creditors. Third, firms can
benefit from "hibernating," using the minimum bare
cash necessary to withstand the pandemic, while using credit
to remain alive until the crisis subdues. Fourth, the
existing legal and regulatory infrastructure is ill-equipped
to deal with an exogenous systemic shock such as this
pandemic. Financial sector policies can help increase the
provision of credit, while posing difficult choices and trade-offs. |
| format |
Working Paper |
| author |
Didier, Tatiana Huneeus, Federico Larrain, Mauricio Schmukler, Sergio L. |
| author_facet |
Didier, Tatiana Huneeus, Federico Larrain, Mauricio Schmukler, Sergio L. |
| author_sort |
Didier, Tatiana |
| title |
Financing Firms in Hibernation during the COVID-19 Pandemic |
| title_short |
Financing Firms in Hibernation during the COVID-19 Pandemic |
| title_full |
Financing Firms in Hibernation during the COVID-19 Pandemic |
| title_fullStr |
Financing Firms in Hibernation during the COVID-19 Pandemic |
| title_full_unstemmed |
Financing Firms in Hibernation during the COVID-19 Pandemic |
| title_sort |
financing firms in hibernation during the covid-19 pandemic |
| publisher |
World Bank, Washington, DC |
| publishDate |
2020 |
| url |
http://documents.worldbank.org/curated/en/818801588952012929/Financing-Firms-in-Hibernation-during-the-COVID-19-Pandemic http://hdl.handle.net/10986/33745 |
| _version_ |
1764479426130608128 |