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  • Fall 2020
  • Article
  • Brookings Papers on Economic Activity

Sizing Up Corporate Restructuring in the COVID Crisis

By: Robin Greenwood, Benjamin Iverson and David Thesmar
  • Format:Print
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Abstract

In the wake of the COVID-19 pandemic, the financial and legal system will need to deal with a surge of financial distress in the business sector. Some firms will be able to survive, while others will face bankruptcy and thus need to be liquidated or reorganized. Many surviving firms will need to be downsized or acquired. In normal times, this triage is supported by the court system, banks, and financial markets. The goal of this paper is to size up the coming surge of financial distress, list the challenges it presents in the current environment, and offer potential policy solutions. Overall, our analysis suggests that the two key issues will be court congestion and excess liquidation and failure of small firms.

Keywords

COVID-19; Health Pandemics; Economy; System Shocks; Financial Crisis; Restructuring

Citation

Greenwood, Robin, Benjamin Iverson, and David Thesmar. "Sizing Up Corporate Restructuring in the COVID Crisis." Brookings Papers on Economic Activity (Fall 2020). (Also NBER Working Paper, No. 28104.)
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About The Author

Robin Greenwood

Finance
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