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Corona and financial stability 3.0: Try equity - risk sharing for companies, large and small

Author

Listed:
  • Boot, Arnoud W. A.
  • Carletti, Elena
  • Kotz, Hans-Helmut
  • Krahnen, Jan Pieter
  • Pelizzon, Loriana
  • Subrahmanyam, Marti G.

Abstract

This policy letter adds to the current discussion on how to design a program of government assistance for firms hurt by the Coronavirus crisis. While not pretending to provide a cure-all proposal, the advocated scheme could help to bring funding to firms, even small firms, quickly, without increasing their leverage and default risk. The plan combines outright cash transfers to firms with a temporary, elevated corporate profit tax at the firm level as a form of conditional payback. The implied equity-like payment structure has positive risk-sharing features for firms, without impinging on ownership structures. The proposal has to be implemented at the pan-European level to strengthen Euro area resilience.

Suggested Citation

  • Boot, Arnoud W. A. & Carletti, Elena & Kotz, Hans-Helmut & Krahnen, Jan Pieter & Pelizzon, Loriana & Subrahmanyam, Marti G., 2020. "Corona and financial stability 3.0: Try equity - risk sharing for companies, large and small," SAFE Policy Letters 81, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safepl:81
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    Citations

    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Economic policy

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    Cited by:

    1. Vasja Roblek & Oshane Thorpe & Mirjana Pejic Bach & Andrej Jerman & Maja Meško, 2020. "The Fourth Industrial Revolution and the Sustainability Practices: A Comparative Automated Content Analysis Approach of Theory and Practice," Sustainability, MDPI, vol. 12(20), pages 1-27, October.
    2. Alina O. Shapovalova & Yuriy B. Ivanov & Victoriia F. Tyschenko & Vlada V. Karpova, 2021. "Assessment of the effectiveness of anti-COVID tax support for innovation activities of small and medium-sized enterprises in OECD countries," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 7(1), pages 68-86.
    3. Eckert, Sandra, 2020. "EU agencies in banking and energy between institutional and policy centralisation," SAFE Working Paper Series 278, Leibniz Institute for Financial Research SAFE.
    4. Julia Anderson & Simone Tagliapietra & Guntram B. Wolff, 2020. "A Framework for a European Economic Recovery After COVID-19," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(4), pages 209-215, July.
    5. Francesco Columba & Tommaso Orlando & Francesco Palazzo & Fabio Parlapiano, 2022. "The features of equity capital increases by Italian corporates," Questioni di Economia e Finanza (Occasional Papers) 709, Bank of Italy, Economic Research and International Relations Area.
    6. Caperna, Giulio & Colagrossi, Marco & Geraci, Andrea & Mazzarella, Gianluca, 2020. "Googling Unemployment During the Pandemic: Inference and Nowcast Using Search Data," Working Papers 2020-04, Joint Research Centre, European Commission.
    7. Segura, Anatoli & Villacorta, Alonso, 2023. "Firm-bank linkages and optimal policies after a rare disaster," Journal of Financial Economics, Elsevier, vol. 149(2), pages 296-322.

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