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• Working Paper | HBS Working Paper Series | 2020

  The Targeting and Impact of Paycheck Protection Program Loans to Small Businesses

  Alexander Bartik, Zoë B. Cullen, Edward L. Glaeser, Michael Luca, Christopher Stanton and Adi Sunderam

  The Paycheck Protection Program (PPP) aimed to quickly deliver hundreds of billions of dollars of loans to small businesses, with the loans administered via private banks. In this paper, we use firm-level data to document the demand and supply of PPP funds. Using an instrumental variables approach, we find that PPP loans led to a 14 to 30 percentage point increase in a business’s expected survival, and a positive but imprecise effect on employment. Moreover, the effects on survival were heterogeneous and highlight an important tradeoff faced by policymakers: while administering the loans via private banks allowed for rapid delivery of funds, it also limited the government’s ability to target the funding—instead allowing pre-existing connections between businesses and banks to determine which firms would benefit from the program.

  Keywords: Paycheck Protection Program; targeting; Impact; Entrepreneurship; Health Pandemics; Small Business; Financing and Loans; Outcome or Result; United States;

  Citation:

  Bartik, Alexander, Zoë B. Cullen, Edward L. Glaeser, Michael Luca, Christopher Stanton, and Adi Sunderam. "The Targeting and Impact of Paycheck Protection Program Loans to Small Businesses." Harvard Business School Working Paper, No. 21-021, August 2020.  View Details

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• Working Paper | 2020

  How Should U.S. Bank Regulators Respond to the COVID-19 Crisis?

  Michael Blank, Samuel G. Hanson, Jeremy C. Stein and Adi Sunderam

  Drawing on lessons from the 2007–2009 Global Financial Crisis (GFC) and a simple conceptual framework, we examine the response of U.S. bank regulators to the COVID-19 pandemic. We argue that the current regulatory strategy of “watchful waiting”—the same strategy that was used during the early stages of the GFC—poses unnecessary risks to the financial system and broader U.S. economy. Instead, promoting an early recapitalization of the banking system, by stopping dividends and by encouraging new equity issues, would be a more prudent way to manage the vulnerabilities the pandemic has created. We close by suggesting additional measures that we believe regulators should take in both the short and long run.

  Keywords: COVID-19; bank regulation; recapitalization; Health Pandemics; Banks and Banking; Governing Rules, Regulations, and Reforms; Strategy; Risk Management; United States;

  Citation:

  Blank, Michael, Samuel G. Hanson, Jeremy C. Stein, and Adi Sunderam. "How Should U.S. Bank Regulators Respond to the COVID-19 Crisis?" Hutchins Center Working Paper, No. 63, June 2020.  View Details

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• Working Paper

  Measuring the Perceived Liquidity of the Corporate Bond Market

  Sergey Chernenko and Adi Sunderam

  We propose a novel measure of bond market liquidity that does not depend on transaction data: the strength of the cross-sectional relationship between mutual fund cash holdings and fund flow volatility. Our measure captures how liquid funds perceive their portfolio holdings to be at a given point in time. The perceived liquidity of speculative grade and Rule 144A bonds is significantly lower than investment grade bonds in the cross section and deteriorated significantly following the 2008-9 financial crisis. Our measure can be applied in settings where either transaction data are not available or transactions are rare, including the markets for asset-backed securities, syndicated loans, and municipal bonds.

  Keywords: bond market; Bonds; Financial Liquidity; Measurement and Metrics;

  Citation:

  Chernenko, Sergey, and Adi Sunderam. "Measuring the Perceived Liquidity of the Corporate Bond Market." NBER Working Paper Series, No. 27092, May 2020.  View Details

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