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R&D Subsidies and Firms' Debt Financing

Andrea Bellucci (), Luca Pennacchio () and Alberto Zazzaro ()

No 153, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: This study investigates the impact of public subsidies for research and development (R&D) on the debt financing of small and medium-sized enterprises (SMEs). It examines a public program implemented in the Marche region of Italy during the period 2005–2012. The study combines matching methods with a difference-in-difference estimator to examine whether receiving public subsidies affects total indebtedness, the structure and cost of debt of awarded firms. The results indicate that R&D subsidies modify firms' (especially young firms') debt structure in favor of long-term financing, and help firms to limit the average cost of debt. Subsidies also foster the use of bank financing, but do not affect the overall level of debt. Taken together, these findings suggest that public funding of SMEs' innovation projects plays a certification role in access to external financial resources for firms receiving subsidies.

Keywords: R&D subsidies; Finance gap; Debt financing; Debt structure; Certification effects; Resource effects. (search for similar items in EconPapers)
JEL-codes: G30 H25 O31 O38 R58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent and nep-ino
Date: 2019-02
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