Unlocking SME growth: Analyzing the government subsidies’ impact on financing in China
Wenjing Sun,
Zheng Wang,
Yongxin Huang and
Yifan Li
PLOS ONE, 2024, vol. 19, issue 8, 1-29
Abstract:
Small and medium-sized enterprises (SMEs) were an important part of China’s economy, but they faced challenges to growth due to financing difficulties. Government subsidies are considered as a potential way to address this problem. This study aims to assess the effectiveness of the Chinese government’s subsidy program aimed at improving the accessibility of financing for SMEs. We analyze a comprehensive dataset of Chinese firms’ subsidy programs from 2011 to 2020. We classify subsidies into unconditional and conditional categories and use fixed-effects regression models to control for the effects of time and between-group variation to more accurately assess the effectiveness of government subsidies. In addition, we use a PSM-DID model to reduce the effect of selectivity bias to more accurately estimate the causal effect of subsidies on financing strategies. We also use a mediated effects model to help understand the mechanisms by which different types of subsidies affect financing strategies. The results show that government subsidies can significantly improve SMEs’ financing ability, but different types of subsidies produce subtle differences. Conditional subsidies support debt financing mainly through incentives, while unconditional subsidies help SMEs improve their equity financing ability through information effects. Furthermore, we find that over-reliance on a single subsidy type may reduce its effectiveness, suggesting a complex relationship between government intervention and SME financing. Thus, well-designed policies are crucial for promoting SMEs and fostering economic growth.
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0304589 (text/html)
https://journals.plos.org/plosone/article/file?id= ... 04589&type=printable (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0304589
DOI: 10.1371/journal.pone.0304589
Access Statistics for this article
More articles in PLOS ONE from Public Library of Science
Bibliographic data for series maintained by plosone ().