The impact of sudden public events and fiscal policy relief on the financing constraints of small and medium enterprises: a quasi-natural experiment during COVID-19

Pinghua Chen, Minye Rao, Syed Ali Raza, Xiaohui Zhan and Xin Zhao

Venture Capital, 2024, vol. 26, issue 1, 31-46

Abstract: Using data on Chinese GEM-listed companies from the first quarter of 2018 to the second quarter of 2022, we examine the impact of COVID-19 on SMEs’ financing constraints and the moderating effect of fiscal and tax incentives using the difference-in-differences method (DID). The results indicate that the COVID-19 shock severely affected SMEs’ financing constraints, and this effect is more pronounced among firms in industries particularly sensitive to COVID-19, such as transportation, catering, accommodation, culture, and entertainment. A further analysis shows that tax incentives and fiscal subsidies have differing moderating effects, with the former alleviating SMEs’ financing constraints and the latter having only a relatively limited effect. This finding provides direct micro-level evidence for understanding the impact of COVID-19 on financing constraints and provides insights for promoting the optimization of fiscal support policies for SMEs.

Date: 2024
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DOI: 10.1080/13691066.2023.2178348

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