An Analysis of the Effects of the State Guarantee Scheme on the Probability of Default of French Firms During the Covid-19 Crisis

During the COVID-19 pandemic, the French government notably introduced a guaranteed loan program. Firms that benefited from state guarantee schemes (SGS) should, ceteris paribus, be relatively riskier than those that did not apply for SGS, and thus default risk should be higher for the former.Our paper investigates the effects of Covid-19 on French firms' default probability and analyses the impact of state support measures on this relationship. Our results indicate the emergence of zombification, whereas under normal circumstances only healthy firms would have been able to benefit from the loan system