Manju Puri Reports on PPP Loans and Credit Access for Small Firms
More than 5 million firms participated in the Payroll Protection Program (PPP), which extended potentially forgivable loans to small- and medium-sized businesses affected by the COVID-19 pandemic. Some eligble firms, however, did not access the program, and others returned the funds shortly after receiving them. NBER Research Associate Manju Puri of Duke University and her collaborators study the impact of receiving, and when relevant returning, PPP loans on the market capitalizations of small, publicly-traded firms. They find that firm values rose, on average, when loans were announced. Firms that received loans, and announced that they were returning them, also experienced a rise in share prices when that news broke. The researchers attribute decisions to return PPP funds to concerns about the costs or reputational risks of future investigations or tobureaucratic burdens, and conclude that market participants regarded such decisions favorably. Puri describes these and other findings in the video above.