# **5. Robustness Checks**

## **5.1 What is the effect of government support on exit and non-response?**

Our analysis in Section 4 uses the sample of firms for whom government support is observed in all three rounds of the ES COVID-19 Follow-up Surveys, thus dropping any firms that closed between rounds or that did not respond to the later survey rounds for other reasons. This section asks whether using this sample of responding firms could bias our results, which may be the case if there is a relationship between government support and exit or non-response.

We start by pointing out that confirmed exit rates are very low in our sample. Table A.3 shows exit rates for the sample of 4,279 firms that reported government support in both Rounds 1 and 2 (i.e., firms that had not closed by Round 2). Only 1 percent of these firms were confirmed to have exited by Round 3. The exit rate is higher, 9 percent, if we include firms that are assumed to have closed since they could not be contacted in Round 3. We also lose firms in our balanced sample due to interview refusal in Round 3 or not reporting government support in Round 3. In total, 19 percent of firms drop out of the sample of 4,279 for any of the reasons mentioned above (confirmed exit, assumed exit, interview refusal, and not reporting government support), giving 3,647 firms in our balanced sample.

Tables A.4 and A.5 follow the same format as Tables 5 and 6, to examine whether receiving government support in Rounds 1 and 2 is associated with subsequent firm exit or non-response to Round 3. We find no relationship between government support and confirmed firm exit. The only variable that shows a statistically significant correlation with confirmed exit is firm age, where older firms were less likely to exit than younger firms (Table A.4 Column 1). When also including assumed exit as the outcome, firms with a female top manager are more likely to exit and state-owned firms are less likely to exit (Table A.4 Column 2).

Column 3 of Tables A.4 and A.5 use an outcome variable that is equal to one if the firm was in Round 1 but is not in our balanced sample for any reason (confirmed exit, assumed exit, or non-response). Firms that received any support in Round 1 or 2 are less likely to drop out of the sample (Table A.4). However, this relationship does not persist when we break down government support by round (Table A.5).

Since government support does not consistently predict exit and non-response in our main regressions, we conclude that the analysis in Section 4, which uses a balanced panel to look at the effect of support on firm performance, likely does not suffer from non-response bias.

## **5.2 Controlling for the competition environment**

Bruhn, Demirguc-Kunt, and Singer (forthcoming) show that countries’ competition environment affected the reallocation of economic activity across firms during the COVID-19 crisis. Countries with a strong competition environment experienced more reallocation from less productive to more productive firms than countries with a weak competition environment. Here, we test whether the competition environment also influenced the relationship between government support and firm performance.

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