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Small-Business Survival Capabilities and Fiscal Programs: Evidence from Oakland

Published online by Cambridge University Press:  27 July 2021

Robert P. Bartlett III Open the ORCID record for Robert P. Bartlett III [Opens in a new window]  and
Adair Morse
Robert P. Bartlett III
Affiliation:
University of California, [email protected]
Adair Morse*
Affiliation:
U.S. Department of the Treasury and University of California, Berkeley
*
[email protected] (corresponding author)
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Abstract

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Using City of Oakland data during COVID-19, we document that small-business components of survival capabilities (i.e., revenue resiliency, labor flexibility, and committed costs) vary by firm size. Nonemployer businesses rely on low-cost structures to survive. Microbusinesses (1–5 employees) depend on 14% greater revenue resiliency. Enterprises (6–50 employees) use labor flexibility to survive but face 10%–20% higher residual closure risk from committed costs. The evidence argues for size targeting of financial support programs, including committed costs and revenue-based lending programs. Supporting the capabilities mapping, we find that the Paycheck Protection Program (PPP) increased medium-run survival probability by 20.5% specifically for microbusinesses.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 7: JFQA Symposium on the Consequences of the COVID-19 Pandemic for Firms and Capital Markets , November 2021 , pp. 2500 - 2544
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

The views and analyses in this article are those of the authors and do not represent the policies or agenda of the U.S. Department of the Treasury. We extend our thanks to the staff of the City of Oakland, whose foresight in implementing the survey used in this article and countless hours of work on it are a testament to the desire to support the people and small businesses of Oakland. Particular thanks go to Marisa Raya. We also thank the SafeGraph and HomeBase companies, which generously shared their data for research related to COVID-19’s impact on U.S. businesses. For helpful comments and suggestions, we thank Raj Chetty, Ran Duchin, Michael Faulkender, Jarrad Harford, Peter Molk, Danny Sokol, Philip Strahan, Annette Vissing-Jørgensen, and Andrew Winden, as well as seminar participants at the University of California, Berkeley; the University of Florida School of Law; the University of Illinois; the Ohio State University; the University of St. Gallen; the Swiss Finance Institute; the Bank of Mexico; Cornell University; the New York Federal Reserve Bank; the University of Frankfurt; Vanderbilt Law School; and participants at the 2021 Allied Social Sciences Association (ASSA) Annual Meeting, the Columbia School of International and Public Affairs (SIPA)/Bank Policy Institute (BPI) February 2021 Conference on Bank Regulation, the NBER Fall 2020 Entrepreneurship Working Group, the 2021 Journal of Financial and Quantitative Analysis (JFQA) Symposium on COVID-19, and the 2021 Societies for Financial Studies (SFS) Cavalcade North America.

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