An Examination Of Public Firms' Involvement In The Covid-19 Small Business Administration Paycheck Protection Program

Abstract

The Paycheck Protection Program rollout in March 2020 released vague qualification guidelines for businesses. The program did not specifically disqualify public companies from receiving a PPP loan, which created a controversy in the media. My study aims to analyze if public companies misused the PPP loans. Specifically, I investigated the public companies' financial qualifications, the kept versus returned loans, and the media's role in the controversy. In this context, kept loans were accepted and used by public companies and returned loans were loans given back to the government. To analyze if public companies misused the PPP loans, I hand-collected data from the companies' financial statements. I collected eight quantitative data points (total assets, total liabilities, total revenue, current assets, current liabilities, operating cash flow, loan size, net income) and calculated three financial ratios (return on assets, cash flow-to-debt ratio, current ratio). The mean and median of the data points and ratios were analyzed in three groups: all loans, kept loans, and returned loans. My analysis suggests public companies did not misuse the loans as they were experiencing financial distress. Additionally, I performed a media analysis that suggests the media backlash played a key factor in public companies returning their PPP loans. My results suggest public companies did qualify under the initial guidance. Additionally, the public companies that returned their PPP loan did so as a result of the media backlash they received. On this basis, the public companies should not have been called out in the media for their involvement in the program.