Abstract This paper examines whether Korea's COVID‐19 credit support programs generated spillover effects on bank lending to riskier firms. While banks extended relatively more credit to riskier eligible SMEs during the policy period (2020), lending to riskier non‐eligible firms also increased in the post‐policy period (2021–2022), indicating a spillover beyond directly targeted firms. This post‐policy increase is concentrated among banks with limited regulatory capital headroom and high exposure to policy‐eligible lending. The evidence is strongest for Z‐score and Leverage and is supported by pre‐policy trend tests, firm fixed effects, and additional post‐policy interactions of firm characteristics.
Choe et al. (Mon,) studied this question.