Access to credit and firm survival during a crisis: The case of zero-bank-debt firms

Before the Covid-19 crisis, zero-bank-debt firms, especially risky ones, faced, due to their lack of credit history, more difficult access to bank loans than firms which previously had bank debt. These credit constraints were tightened by the Covid shock, irrespective of firms’ risk, arguably because of increased information asymmetries during a period of high macroeconomic uncertainty. Zero-bank-debt firms, even those which were safe and profitable, were also far more likely to leave the market during the pandemic than firms which previously had bank debt. However, those zero-bank-debt firms that did obtain new credit reduced their probability of exit.