Financing Firms in Hibernation During the COVID-19 Pandemic

The coronavirus (COVID-19) pandemic has imposed a heavy toll on economies worldwide, nearly halting economic activity. Although most firms should be viable when economic activity resumes, cash flows have collapsed, possibly triggering inefficient b...

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Main Authors:	Didier, Tatiana, Huneeus, Federico, Larrain, Mauricio, Schmukler, Sergio L.
Format:	Policy Note
Language:	English
Published:	World Bank, Washington, DC 2020
Subjects:	SMALL AND MEDIUM-SIZED ENTERPRISES ACCESS TO FINANCE PUBLIC FINANCE DEBT COVID-19 CORONAVIRUS ECONOMIC SHOCK PANDEMIC STOCK MARKET INDEX ECONOMIC CRISIS DEBT CRISIS CREDIT SME FINANCE MONETARY POLICY RISK MANAGEMENT PUBLIC GUARANTEE
Online Access:	http://documents.worldbank.org/curated/en/228811586799856319/Financing-Firms-in-Hibernation-During-the-COVID-19-Pandemic http://hdl.handle.net/10986/33611

id	okr-10986-33611
recordtype	oai_dc
spelling	okr-10986-336112021-09-16T17:44:24Z Financing Firms in Hibernation During the COVID-19 Pandemic Didier, Tatiana Huneeus, Federico Larrain, Mauricio Schmukler, Sergio L. SMALL AND MEDIUM-SIZED ENTERPRISES ACCESS TO FINANCE PUBLIC FINANCE DEBT COVID-19 CORONAVIRUS ECONOMIC SHOCK PANDEMIC STOCK MARKET INDEX ECONOMIC CRISIS DEBT CRISIS CREDIT SME FINANCE MONETARY POLICY RISK MANAGEMENT PUBLIC GUARANTEE The coronavirus (COVID-19) pandemic has imposed a heavy toll on economies worldwide, nearly halting economic activity. Although most firms should be viable when economic activity resumes, cash flows have collapsed, possibly triggering inefficient bankruptcies with long-term detrimental effects. Firms' valuable relationships with workers, suppliers, customers, governments, and creditors could be broken. Hibernation could slow the economy until the pandemic is brought under control and preserve those vital relationships for a quicker recovery. If all stakeholdersshare the burden of economic inactivity, firms are more likely to survive. Financing could help cover firms' reduced operational costs until the pandemic subdues. But financial systems are not well equipped to handle this type of exogenous and synchronized systemic shock. Governments could work with the financial sector to keep firms afloat, enabling forbearance as needed and absorbing part of the firms' increased credit risk, by implementing policies with proper incentives to keep firms viable. 2020-04-17T14:52:08Z 2020-04-17T14:52:08Z 2020-04-13 Policy Note http://documents.worldbank.org/curated/en/228811586799856319/Financing-Firms-in-Hibernation-During-the-COVID-19-Pandemic http://hdl.handle.net/10986/33611 English Research and Policy Briefs,no. 30; CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work Economic & Sector Work :: Policy Note
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	SMALL AND MEDIUM-SIZED ENTERPRISES ACCESS TO FINANCE PUBLIC FINANCE DEBT COVID-19 CORONAVIRUS ECONOMIC SHOCK PANDEMIC STOCK MARKET INDEX ECONOMIC CRISIS DEBT CRISIS CREDIT SME FINANCE MONETARY POLICY RISK MANAGEMENT PUBLIC GUARANTEE
spellingShingle	SMALL AND MEDIUM-SIZED ENTERPRISES ACCESS TO FINANCE PUBLIC FINANCE DEBT COVID-19 CORONAVIRUS ECONOMIC SHOCK PANDEMIC STOCK MARKET INDEX ECONOMIC CRISIS DEBT CRISIS CREDIT SME FINANCE MONETARY POLICY RISK MANAGEMENT PUBLIC GUARANTEE Didier, Tatiana Huneeus, Federico Larrain, Mauricio Schmukler, Sergio L. Financing Firms in Hibernation During the COVID-19 Pandemic
relation	Research and Policy Briefs,no. 30;
description	The coronavirus (COVID-19) pandemic has imposed a heavy toll on economies worldwide, nearly halting economic activity. Although most firms should be viable when economic activity resumes, cash flows have collapsed, possibly triggering inefficient bankruptcies with long-term detrimental effects. Firms' valuable relationships with workers, suppliers, customers, governments, and creditors could be broken. Hibernation could slow the economy until the pandemic is brought under control and preserve those vital relationships for a quicker recovery. If all stakeholdersshare the burden of economic inactivity, firms are more likely to survive. Financing could help cover firms' reduced operational costs until the pandemic subdues. But financial systems are not well equipped to handle this type of exogenous and synchronized systemic shock. Governments could work with the financial sector to keep firms afloat, enabling forbearance as needed and absorbing part of the firms' increased credit risk, by implementing policies with proper incentives to keep firms viable.
format	Policy Note
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/228811586799856319/Financing-Firms-in-Hibernation-During-the-COVID-19-Pandemic http://hdl.handle.net/10986/33611
_version_	1764479139431055360

Financing Firms in Hibernation During the COVID-19 Pandemic

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