Insolvency Prospects Among Small-and-Medium-Sized Enterprises in Advanced Economies: Assessment and Policy Options

By Federico J Diez, Romain A Duval, Jiayue Fan, Jose M Garrido, Sebnem Kalemli-Ozcan, Chiara Maggi, Maria Soledad Martinez Peria, Nicola Pierri

April 2, 2021

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Federico J Diez, Romain A Duval, Jiayue Fan, Jose M Garrido, Sebnem Kalemli-Ozcan, Chiara Maggi, Maria Soledad Martinez Peria, and Nicola Pierri. Insolvency Prospects Among Small-and-Medium-Sized Enterprises in Advanced Economies: Assessment and Policy Options, (USA: International Monetary Fund, 2021) accessed November 21, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

The COVID-19 pandemic has increased insolvency risks, especially among small and medium enterprises (SMEs), which are vastly overrepresented in hard-hit sectors. Without government intervention, even firms that are viable a priori could end up being liquidated—particularly in sectors characterized by labor-intensive technologies, threatening both macroeconomic and social stability. This staff discussion note assesses the impact of the pandemic on SME insolvency risks and policy options to address them. It quantifies the impact of weaker aggregate demand, changes in sectoral consumption patterns, and lockdowns on firm balance sheets and estimates the impact of a range of policy options, for a large sample of SMEs in (mostly) advanced economies.

Subject: Economic sectors, Financial institutions, Financial sector policy and analysis, Health, Public financial management (PFM)

Keywords: “Quasi” Equity Injections, Asia and Pacific, Bankruptcy, Cash flow, Cash position, COVID-19, Equity injection, Financial statements, Firm exit, Illiquid firm, Insolvency, Insolvent firm, Small and medium enterprises, Small- and medium-size enterprises, Solvency, Southern Europe, Stocks

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Staff Discussion Notes No. 2021/002
Stock No:

SDNEA2021002
ISBN:

9781513574561
ISSN:

2617-6750

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