Who Supplies PPP Loans (and Does It Matter)? Banks, Relationships, and the COVID Crisis

By Lei Li, Philip E. Strahan. Journal of Financial and Quantitative Analysis, 2020

114 citations recorded by the source corpus.

Abstract We analyze the bank supply of credit under the Paycheck Protection Program (PPP). The literature emphasizes relationships as a means to improve lender information, which helps banks manage credit risk. Despite imposing no risk, however, the PPP supply reflects traditional measures of relationship lending: decreasing in bank size and increasing in prior experience, commitment lending, and core deposits. Our results suggest a new benefit of bank relationships: They help firms access government-subsidized lending. Consistent with this benefit, we show that the bank PPP supply, based on the structure of the local banking sector, alleviates increases in unemployment.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/06c8da35d1526fa3ede1e0f74396071af129c63e

Citations in the corpus

• Did the paycheck protection program hit the target? (2020, unknown): “Li and Strahan (2020) use variation in the strength of the relationships between local banks and firms and, similar to us, find modest employment effects of the program.”