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What 100,000 bank accounts tell us about French SMEs in September 2021

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The Covid-19 crisis was characterised in most industrialised countries by an unprecedented drop in economic activity for many firms as well as exceptional government financial aid programmes to help these firms. Fears that a large number of businesses, especially small ones, would fail were prevalent, especially in the first phase of the crisis. This fear motivated researchers to estimate the impact of the Covid-19 shock on firms’ cash flows (taking into account government support). An example of this is the paper by Gourinchas et al. (2021), who construct a model of firm cost minimisation with rich firm-level financial data. They estimate the impact of the crisis on business failures among small and medium-sized enterprises (SMEs). Their simulations suggest that many SMEs would have failed in the absence of policy support. This is also the conclusion of Barnes et al. (2021) in the British case. For France, Coeuré (2021) offers a very detailed firm-level analysis of public support.

Having avoided a massive wave of firm failures during the crisis, today many countries are at a key juncture as the activity of firms – especially those mostly hit by restrictions – is quickly rebounding at the same time as the policy support to these firms is reduced or eliminated. A key question – symmetric to the early concern that public support may not be enough to counter the economic shock to SMEs – is whether the rebound in economic activity will be enough to compensate the reduction in public support. The policy discussion is also complicated by limited real-time information on the financial situation of firms. Existing analysis is based either on simulations (in addition to papers cited above, see Bureau et al. 2021) or on precise but dated (i.e. December 2020) balance sheets information of firms (Doucinet et al. 2021). This lack of real-time information makes it difficult to predict whether and how quickly firm failures will rebound in the near future, an issue which has key consequences for the labour market dynamics or banks losses.

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One source of real time data on the financial situation of firms is bank account data. This source has barely been exploited. 1 An exception is the Bank of England (Hurley et al. 2021), but the latest data point for which is December 2020.

In a new paper (Epaulard et al. 2021), we exploit a unique data et on corporate accounts of a major French Bank – Crédit Mutuel Alliance Fédérale – to study the evolution of the financial position of French micro-enterprises (MEs) (firms with fewer than ten employees) and SMEs (between 10 and 250 employees). We use a sample of approximately 100,000 anonymised MEs/SMEs throughout the Covid-19 crisis. Specifically, our data track inflows and outflows into checking and savings account, as well as balances on these accounts, and liabilities at the bank. While the dataset does not have any information on non-financial assets and liabilities, it still allows us to track, in near real time and at high frequency, firms’ liquidity and net financial position. Hence, we focus on two dimensions of the financial situation of firms that are known to be good predictors of their risk of failure: liquidity and solvency.

In the future, as the government progressively withdraws its support to firms, monthly updates will allow us to monitor (1) whether the economic recovery is sufficient to offset the drop in financial aid, and (2) whether firms can repay the debt contracted during the crisis. The latest data point we present here is September 2021.

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