Are private equity and venture capital helping small and medium-sized enterprises during the COVID-19 pandemic? Evidence from China

Song Yang

Economic Analysis and Policy, 2022, vol. 76, issue C, 1-14

Abstract: The rapid spread of COVID-19 worldwide since 2020 has, undeniably, negatively influenced the global economy and environment. Small and medium-sized enterprises (SMEs) are among the worst-hit victims of COVID-19, particularly in developing countries. As primary channels financing SMEs, what roles have private equity and venture capital (PE/VC) played in this crisis? Using the 2010–2021 data of 4462 listed companies, we aimed to assess the impact of PE/VC on financial risk among Chinese SMEs. We constructed a capital structure selection model to assess the risk preference of PE/VC and explored the roles of PE/VC in the financial risk management of enterprises during COVID-19. Based on both theory and empirical evidence, PE/VC negatively impacts the financial risk of enterprises, implying that intervention by the management of PE/VC can aggravate the financial risk. However, in reality, PE/VC positively impacted enterprise financial risk during COVID-19. Thus, the government should implement some easing policies to stimulate access and investment policies of PE/VC as well as provide more practical policies to support investment institutions in China and other counties.

Keywords: Private equity; Venture capital; Financial risk; Small and medium-sized enterprises; COVID-19 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:76:y:2022:i:c:p:1-14

DOI: 10.1016/j.eap.2022.07.007

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