Credit constrained firms and government subsidies: evidence from a European Union program

Eszter Balogh, Adám Banai, Tirupam Goel, Péter Lang, Martin Stancsics, Elod Takats and Almos Telegdy

No 984, BIS Working Papers from Bank for International Settlements

Abstract: We assess the effects of non-repayable subsidies on financially constrained and unconstrained Hungarian SMEs. Using rejected subsidy applicants as control group and bank queries to the credit-registry to identify firms that applied for but did not receive a loan, we show that subsidies generate a sizeable incremental impact on asset growth of constrained firms relative to unconstrained businesses. This effect, however, is transitory and does not translate into higher sales, profitability or productivity. Financing, therefore, may not be the primary hurdle for these SMEs, and credit constraints may reflect other shortcomings, such as lack of good management or viable projects.

Keywords: SMEs; subsidies; credit constraints; emerging market economies; difference-in-differences; credit registry micro-data (search for similar items in EconPapers)
JEL-codes: E58 G21 G38 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2021-11
New Economics Papers: this item is included in nep-cfn, nep-ent, nep-fdg, nep-mac and nep-sbm
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bis.org/publ/work984.pdf Full PDF document (application/pdf)
https://www.bis.org/publ/work984.htm (text/html)

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:bis:biswps:984

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().