Paycheck Protection Program: The Determinants of Participation and the Characteristics of the Loans Obtained

• In Event: 3.01 Nonprofit Research Concurrent Session: Governance/Audit

Abstract

We examine the characteristics of the Paycheck Protection Program (PPP) participants and the loans they obtained. We leverage public data on 71,283 nonprofit organizations to identify the business characteristics of PPP participants and the factors associated with loan amounts and loan forgiveness. Focusing on governance, interest costs, and financial distress characteristics, we find better governed businesses, businesses with interest costs, and less distressed businesses are more likely to participate. Loan amounts are similarly associated with interest costs and lower financial distress; however, better governed participants received smaller loans. Loan forgiveness is associated with stronger governance and lower financial distress, but it is less likely for businesses with interest expense. We also find that loan amounts and forgiveness are negatively associated with loans originated with fintech financial institutions. Beyond the academic contributions, the findings are relevant both for helping governments design business-focused economic relief programs that will reach the intended targets during economic downturns as well as businesses deciding whether to participate in such programs.

Authors

• Daniel Gordon Neely, University of Wisconsin-Milwaukee

• Gregory D. Saxton, York University

• Paul Anthony Wong, University of California-Davis