IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v73y2025ipas0275531924003799.html
   My bibliography  Save this article

The effect of impact investing on performance of private firms

Author

Listed:
  • Ichev, Riste
  • Valentinčič, Aljoša

Abstract

This study empirically examines the effectiveness of impact investing of private firms in Slovenia. We use a sample of 7671 distinct private firms during the 2005–2020 period applying for and eventually receiving various government grants. This allows us to identify firms with the intent to impact-invest. We employ the staggered difference-in-difference (SDiD) approach recently proposed by Baker et al. (2022) and Athey and Imbens (2022) to assess the outcomes of these investments over time and across firms. SDiD allows for firms switching back and forth between receiving and not receiving grants and thus being a treated observation or a potential control observation respectively. Our results show that firms receiving an impact investing grant, on average, increase the number of employees in the subsequent period, generate higher cash flows from operations, increase value added per employee, make higher capital investments, have higher levels of exports, but grants hinder firm productivity in the short-run. PSM, the time-varying average treatment effects, and Heckman’s two-stage approach robustness analyses further support the conclusions that the impact investing grants successfully foster firm performance.

Suggested Citation

  • Ichev, Riste & Valentinčič, Aljoša, 2025. "The effect of impact investing on performance of private firms," Research in International Business and Finance, Elsevier, vol. 73(PA).
    • Handle: RePEc:eee:riibaf:v:73:y:2025:i:pa:s0275531924003799
    DOI: 10.1016/j.ribaf.2024.102586
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531924003799
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2024.102586?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. William R. Kerr & Josh Lerner & Antoinette Schoar, 2014. "The Consequences of Entrepreneurial Finance: Evidence from Angel Financings," The Review of Financial Studies, Society for Financial Studies, vol. 27(1), pages 20-55, January.
    2. Konstantins Benkovskis & Oļegs Tkačevs & Naomitsu Yashiro & Beata Javorcik, 2019. "Importance of EU regional support programmes for firm performance," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 34(98), pages 267-313.
    3. David McKenzie, 2017. "Identifying and Spurring High-Growth Entrepreneurship: Experimental Evidence from a Business Plan Competition," American Economic Review, American Economic Association, vol. 107(8), pages 2278-2307, August.
    4. Clément de Chaisemartin & Xavier D'Haultfœuille, 2020. "Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects," American Economic Review, American Economic Association, vol. 110(9), pages 2964-2996, September.
    5. Andrea Pufahl & Christoph R. Weiss, 2009. "Evaluating the effects of farm programmes: results from propensity score matching," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 36(1), pages 79-101, March.
    6. Criscuolo, Chiara & Martin, Ralf & Overman, Henry & Van Reenen, John, 2012. "The Causal Effects of an Industrial Policy," IZA Discussion Papers 6323, Institute of Labor Economics (IZA).
    7. Gunnar Friede & Timo Busch & Alexander Bassen, 2015. "ESG and financial performance: aggregated evidence from more than 2000 empirical studies," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(4), pages 210-233, October.
    8. Anže Burger & Matija Rojec, 2018. "Impotence of Crisis-Motivated Subsidization of Firms: The Case of Slovenia," Eastern European Economics, Taylor & Francis Journals, vol. 56(2), pages 122-148, March.
    9. Konstantins Benkovskis & Olegs Tkacevs & Naomitsu Yashiro, 2018. "Importance of EU Regional Support Programmes for Firm Performance," Working Papers 2018/01, Latvijas Banka.
    10. Tang, Dragon Yongjun & Zhang, Yupu, 2020. "Do shareholders benefit from green bonds?," Journal of Corporate Finance, Elsevier, vol. 61(C).
    11. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    12. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    13. Aljosa Valentincic & Ales Novak & Urska Kosi, 2017. "Accounting Quality in Private Firms During the Transition Towards International Standards," Accounting in Europe, Taylor & Francis Journals, vol. 14(3), pages 358-387, September.
    14. Chiara Criscuolo & Ralf Martin & Henry G. Overman & John Van Reenen, 2019. "Some Causal Effects of an Industrial Policy," American Economic Review, American Economic Association, vol. 109(1), pages 48-85, January.
    15. Brigitte Eierle & Simone Wencki, 2016. "The determinants of capitalising development costs in private companies: evidence from Germany," Journal of Business Economics, Springer, vol. 86(3), pages 259-300, April.
    16. Marco Caliendo & Sabine Kopeinig, 2008. "Some Practical Guidance For The Implementation Of Propensity Score Matching," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 31-72, February.
    17. Baiman, Stanley & Rajan, Madhav V., 2002. "Incentive issues in inter-firm relationships," Accounting, Organizations and Society, Elsevier, vol. 27(3), pages 213-238, April.
    18. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    19. Hellmann, Thomas & Schure, Paul & Vo, Dan H., 2021. "Angels and venture capitalists: Substitutes or complements?," Journal of Financial Economics, Elsevier, vol. 141(2), pages 454-478.
    20. Campbell, Dennis & Loumioti, Maria & Wittenberg-Moerman, Regina, 2019. "Making sense of soft information: interpretation bias and loan quality," Journal of Accounting and Economics, Elsevier, vol. 68(2).
    21. Costello, Anna M., 2013. "Mitigating incentive conflicts in inter-firm relationships: Evidence from long-term supply contracts," Journal of Accounting and Economics, Elsevier, vol. 56(1), pages 19-39.
    22. Stanley Baiman & Madhav V. Rajan, 2002. "The Role of Information and Opportunism in the Choice of Buyer‐Supplier Relationships," Journal of Accounting Research, Wiley Blackwell, vol. 40(2), pages 247-278, May.
    23. Mramor, Dusan & Valentincic, Aljosa, 2003. "Forecasting the liquidity of very small private companies," Journal of Business Venturing, Elsevier, vol. 18(6), pages 745-771, November.
    24. Urska Kosi & Aljosa Valentincic, 2013. "Write-offs and Profitability in Private Firms: Disentangling the Impact of Tax-Minimisation Incentives," European Accounting Review, Taylor & Francis Journals, vol. 22(1), pages 117-150, May.
    25. Söderblom, Anna & Samuelsson, Mikael & Wiklund, Johan & Sandberg, Rickard, 2015. "Inside the black box of outcome additionality: Effects of early-stage government subsidies on resource accumulation and new venture performance," Research Policy, Elsevier, vol. 44(8), pages 1501-1512.
    26. Michiel De Meyere & Heidi Vander Bauwhede & Philippe Van Cauwenberge, 2018. "The impact of financial reporting quality on debt maturity: the case of private firms," Accounting and Business Research, Taylor & Francis Journals, vol. 48(7), pages 759-781, November.
    27. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
    28. Neil Garrod & Urska Kosi & Aljosa Valentincic, 2008. "Asset Write‐Offs in the Absence of Agency Problems," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(3‐4), pages 307-330, April.
    29. Antony Bugg-Levine & Jed Emerson, 2011. "Impact Investing: Transforming How We Make Money while Making a Difference," Innovations: Technology, Governance, Globalization, MIT Press, vol. 6(3), pages 9-18, July.
    30. Svenja Jarchow & Christoph Kaserer & Henry Keppler, 2023. "Family firm performance in times of crisis—new evidence from Germany," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(3), pages 543-580, September.
    31. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    32. Athey, Susan & Imbens, Guido W., 2022. "Design-based analysis in Difference-In-Differences settings with staggered adoption," Journal of Econometrics, Elsevier, vol. 226(1), pages 62-79.
    33. Anirudh Agrawal & Kai Hockerts, 2019. "Impact Investing Strategy: Managing Conflicts between Impact Investor and Investee Social Enterprise," Sustainability, MDPI, vol. 11(15), pages 1-21, July.
    34. Michela Bia & Alessandra Mattei, 2012. "Assessing the effect of the amount of financial aids to Piedmont firms using the generalized propensity score," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 21(4), pages 485-516, November.
    35. Ann Vanstraelen & Caren Schelleman, 2017. "Auditing private companies: what do we know?," Accounting and Business Research, Taylor & Francis Journals, vol. 47(5), pages 565-584, July.
    36. Baker, Andrew C. & Larcker, David F. & Wang, Charles C.Y., 2022. "How much should we trust staggered difference-in-differences estimates?," Journal of Financial Economics, Elsevier, vol. 144(2), pages 370-395.
    37. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    38. Giovanni Cerulli & Marco Ventura, 2019. "Estimation of pre- and posttreatment average treatment effects with binary time-varying treatment using Stata," Stata Journal, StataCorp LLC, vol. 19(3), pages 551-565, September.
    39. Ondřej Dvouletý & Ivana Blažková, 2019. "Assessing the microeconomic effects of public subsidies on the performance of firms in the czech food processing industry: A counterfactual impact evaluation," Agribusiness, John Wiley & Sons, Ltd., vol. 35(3), pages 394-422, July.
    40. Prowse, Stephen, 1998. "Angel investors and the market for angel investments," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 785-792, August.
    41. Ondřej Dvouletý & Stjepan Srhoj & Smaranda Pantea, 2021. "Public SME grants and firm performance in European Union: A systematic review of empirical evidence," Small Business Economics, Springer, vol. 57(1), pages 243-263, June.
    42. Stefaan Decramer & Stijn Vanormelingen, 2016. "The effectiveness of investment subsidies: evidence from a regression discontinuity design," Small Business Economics, Springer, vol. 47(4), pages 1007-1032, December.
    43. Tessa Hebb, 2013. "Impact investing and responsible investing: what does it mean?," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 3(2), pages 71-74, April.
    44. Freear, John & Sohl, Jeffrey E. & Wetzel, William Jr., 1994. "Angels and non-angels: Are there differences?," Journal of Business Venturing, Elsevier, vol. 9(2), pages 109-123, March.
    45. Jochen Bigus & Christa Hillebrand, 2017. "Bank Relationships and Private Firms’ Financial Reporting Quality," European Accounting Review, Taylor & Francis Journals, vol. 26(2), pages 379-409, April.
    46. Neil Garrod & Urska Kosi & Aljosa Valentincic, 2008. "Asset Write-Offs in the Absence of Agency Problems," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(3-4), pages 307-330.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bearzotti, Enia & Polanec, Sašo & Bartolj, Tjaša, 2023. "The Effects of Subsidies on Firm Size and Productivity," MPRA Paper 118490, University Library of Munich, Germany.
    2. Chy, Mahfuz & Kyung, Hoyoun, 2023. "The effect of bond market transparency on bank loan contracting," Journal of Accounting and Economics, Elsevier, vol. 75(2).
    3. Kubo, Katsuyuki & Sasaki, Ryo, 2024. "The impact of a CSR committee on CSR performance," Japan and the World Economy, Elsevier, vol. 71(C).
    4. Stjepan Srhoj & Bruno Škrinjarić & Sonja Radas, 2021. "Bidding against the odds? The impact evaluation of grants for young micro and small firms during the recession," Small Business Economics, Springer, vol. 56(1), pages 83-103, January.
    5. Clément de Chaisemartin & Xavier D’Haultfœuille, 2023. "Two-way fixed effects and differences-in-differences with heterogeneous treatment effects: a survey," The Econometrics Journal, Royal Economic Society, vol. 26(3), pages 1-30.
    6. Rik Chakraborti & Gavin Roberts, 2023. "How price-gouging regulation undermined COVID-19 mitigation: county-level evidence of unintended consequences," Public Choice, Springer, vol. 196(1), pages 51-83, July.
    7. Romain Baeriswyl & Alex Oktay & Marc-Antoine Ramelet, 2023. "Exchange rate shocks and equity prices: the role of currency denomination," Working Papers 2023-05, Swiss National Bank.
    8. Ondřej Dvouletý & Stjepan Srhoj & Smaranda Pantea, 2021. "Public SME grants and firm performance in European Union: A systematic review of empirical evidence," Small Business Economics, Springer, vol. 57(1), pages 243-263, June.
    9. Marcus Roller, Daniel Steinberg, 2023. "Differences-in-Differences with multiple Treatments under Control," Diskussionsschriften credresearchpaper41, Universitaet Bern, Departement Volkswirtschaft - CRED.
    10. Luca Coraggio & Marco Pagano & Annalisa Scognamiglio & Joacim Tåg, 2022. "JAQ of All Trades: Job Mismatch, Firm Productivity and Managerial Quality," EIEF Working Papers Series 2205, Einaudi Institute for Economics and Finance (EIEF), revised Mar 2022.
    11. Giulia Bettin & Isabella Giorgetti & Stefano Staffolani, 2024. "The impact of Covid-19 lockdown on the gender gap in the Italian labour market," Review of Economics of the Household, Springer, vol. 22(1), pages 1-33, March.
    12. Omar Isaac Asensio & Olga Churkina & Becky D. Rafter & Kira E. O’Hare, 2024. "Housing policies and energy efficiency spillovers in low and moderate income communities," Nature Sustainability, Nature, vol. 7(5), pages 590-601, May.
    13. Gregory Faletto, 2023. "Fused Extended Two-Way Fixed Effects for Difference-in-Differences With Staggered Adoptions," Papers 2312.05985, arXiv.org, revised Oct 2024.
    14. Goel, Tirupam & Telegdy, Álmos & Banai, Ádám & Takáts, Előd, 2024. "Subsidy-driven firm growth: Does loan history matter? Evidence from a European Union subsidy program," Journal of Corporate Finance, Elsevier, vol. 87(C).
    15. Li, Yutao & Zhang, Jinning & Lyu, Yanwei, 2023. "Does telecommunications infrastructure promote entrepreneurship in developing countries? Evidence from a quasi-natural experiment in China," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 106-119.
    16. Mikhail Mamonov & Anna Pestova & Steven Ongena, 2023. "“Crime and Punishment”? How Banks Anticipate and Propagate Global Financial Sanctions," CERGE-EI Working Papers wp753, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    17. Kayaoglu, Aysegul, 2022. "Do refugees cause crime?," World Development, Elsevier, vol. 154(C).
    18. Mark Kattenberg & Bas Scheer & Jurre Thiel, 2023. "Causal forests with fixed effects for treatment effect heterogeneity in difference-in-differences," CPB Discussion Paper 452, CPB Netherlands Bureau for Economic Policy Analysis.
    19. Ahn, Soojung & Steinbach, Sandro, 2022. "COVID-19 Trade Actions and Their Impact on the Agricultural and Food Sector," 2023 Allied Social Sciences Association (ASSA) Annual Meeting, January 6-8, 2023, New Orleans, Louisiana 316789, Agricultural and Applied Economics Association.
    20. Marco Compagnoni & Marco Grazzi & Fabio Pieri & Chiara Tomasi, 2025. "Extended Producer Responsibility and Trade Flows in Waste: The Case of Batteries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(1), pages 43-76, January.

    More about this item

    Keywords

    Impact investing; financial grants; firm performance; investment policy; private firms;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:73:y:2025:i:pa:s0275531924003799. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.