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Back From the Brink: State‐Guaranteed Loans and Financial Recovery

Year: 2025

Type: article

Abstract: ABSTRACT This paper studies the financial trajectories of large firms that accessed a €200 billion state‐backed loan programme in Italy, part of broader interventions to contain corporate distress during the COVID‐19 crisis. Using firm‐level data from 2016 to 2023, we find that supported firms were initially more leveraged, less profitable and less liquid. Their financial performance, however, improved significantly after the intervention. The recovery in debt servicing capacity, even among the most fragile firms, is mainly driven by increased profitability rather than by an extension of debt maturity. Our findings highlight the role of public guarantees in fostering financial resilience.

Source: European Financial Management

DOI: 10.1111/eufm.70006

Authors: Emanuele Bajo, Massimiliano Barbi, Marco Bigelli

Institution: University of Bologna

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,350