When firms do not take the money and run: evidence from corporate loan moratoria

Suspending loan repayments is a widely used policy tool to provide liquidity during crises. We study the take-up and real effects of the 2020 Austrian corporate debt moratoria, which required banks to temporarily postpone loan repayments for eligible firms. Exploiting a discontinuity in eligibility at a two-million-euro asset threshold, we document a take-up rate of 44%, well below full participation, reflecting both the pecuniary cost of the policy and firms’ fear of stigmatization. Despite the moderate take-up, moratoria increase investment and profitability without increasing defaults once repayments resume. We estimate a marginal propensity to invest of 47 cents per euro of postponed payments. We compare moratoria with grants, the predominant form of business support in the United States. A key feature of the policy is that relief is administered by relationship lenders, who continue to bear credit risk, retain incentives to monitor borrowers, and can credibly discipline them through future lending decisions. Although grants achieve higher take-up, our results suggest that moratoria differ fundamentally by discouraging firms from diverting liquidity to shareholders and instead channeling it toward productive investment. JEL Classification: G21, G32, G35, H81, D25