Firms’ Financing Conditions Before and After the Covid-19 pandemic: a survey–based analysis

Abstract In the paper we analyze how the economic situation and financing conditions of euro area firms have changed along different crises that hit the euro area in the 10 years with a focus on the changes before and after the Covid-19 pandemic. We use the responses of a large sample of euro area firms to a qualitative business survey run on behalf of the European Central Bank / European Commission (Survey on the access to finance of enterprises - SAFE) since 2009. Thus, all the analysis centers around firms’ reported perceptions. We describe how during the Covid-19 crisis, and despite generally accommodative financing conditions and state aid measures, turnover and profits of firms decreased sharply, having a dampening impact on firms’ employment and investment. As a result, firms’ financial vulnerability peaked during the Covid-19 crisis which consequences for the subsequent periods. From the financing side, around the Covid-19 period, firms were signaling some deterioration in their access to finance as it is the case more recently due to the pass-through of increasing policy rates to the overall corporate financing conditions. We document that a deterioration in financing conditions does have an impact on both firm-specific and aggregate growth. Based on firms’ perceptions only, we find a link between real decisions of firms (in terms of investment and employment), macroeconomic developments and some key survey-based indicators of financing conditions.