We study the effects of financial frictions on firm exit when firms face large liquidity shocks. We develop a simple model of firm cost-minimization that introduces a financial friction that limits firms' borrowing capacity to smooth temporary shocks to liquidity. In this framework, firm exit...

We study the effects of fiscal policy in response to the COVID-19 pandemic at the firm, sector, country and global levels. First, we estimate the impact of COVID-19 and policy responses on small and medium-sized enterprise (SME) business failures. We combine firm-level financial data from 50...

We estimate the impact of the COVID-19 crisis on business failures among small and medium-size enterprises (SMEs) in seventeen countries using a large representative firm-level database. We use a simple model of firm cost minimization and measure each firm's liquidity shortfall during and after...

This paper assesses the prospects of a 2021 time bomb in small and medium-sized enterprises (SME) failures triggered by the generous support policies enacted during the 2020 COVID-19 crisis. Policies implemented in 2020, on their own, do not create a 2021 time bomb for SMEs. Rather, business...

We study the leverage of U.S. firms over their life cycles and the connection between firm leverage, firm growth, and aggregate shocks. We construct a new dataset that combines private and public firms' balance sheets with firm-level data from U.S. Census Bureau's Longitudinal Business Database...

I provide evidence that portfolio equity inflows can have expansionary effects on GDP and inflation if not offset by monetary policy. I use a shift-share instrument to estimate equity inflows based on plausibly exogenous timing of inflows into mutual funds with heterogeneous country portfolios....

Venture capital (VC) and growth are examined both empirically and theoretically. Empirically, VC-backed startups have higher early growth rates and initial patent quality than non-VC-backed ones. VC backing increases a startup's likelihood of reaching the right tails of the firm size and...

The trajectory of new business applications and transitions to employer businesses differ markedly during the Great Recession and the COVID-19 recession. Both applications and transitions to employer startups decreased slowly but persistently in the post-Lehman crisis period of the Great...

Using American Recovery and Reinvestment Act (ARRA) data, we show that firms lever their political connections to win stimulus grants and that public expenditure channeled through politically connected firms hinders job creation. We build a unique database that links information on campaign...

What locations generate more business ideas, and where are ideas more likely to turn into businesses? Using comprehensive administrative data on business applications, we analyze the spatial disparity in the creation of business ideas and the formation of new employer startups from these ideas....