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The impact of sudden public events and fiscal policy relief on the financing constraints of small and medium enterprises: a quasi-natural experiment during COVID-19

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  • Pinghua Chen
  • Minye Rao
  • Syed Ali Raza
  • Xiaohui Zhan
  • Xin Zhao

Abstract

Using data on Chinese GEM-listed companies from the first quarter of 2018 to the second quarter of 2022, we examine the impact of COVID-19 on SMEs’ financing constraints and the moderating effect of fiscal and tax incentives using the difference-in-differences method (DID). The results indicate that the COVID-19 shock severely affected SMEs’ financing constraints, and this effect is more pronounced among firms in industries particularly sensitive to COVID-19, such as transportation, catering, accommodation, culture, and entertainment. A further analysis shows that tax incentives and fiscal subsidies have differing moderating effects, with the former alleviating SMEs’ financing constraints and the latter having only a relatively limited effect. This finding provides direct micro-level evidence for understanding the impact of COVID-19 on financing constraints and provides insights for promoting the optimization of fiscal support policies for SMEs.

Suggested Citation

  • Pinghua Chen & Minye Rao & Syed Ali Raza & Xiaohui Zhan & Xin Zhao, 2024. "The impact of sudden public events and fiscal policy relief on the financing constraints of small and medium enterprises: a quasi-natural experiment during COVID-19," Venture Capital, Taylor & Francis Journals, vol. 26(1), pages 31-46, January.
    • Handle: RePEc:taf:veecee:v:26:y:2024:i:1:p:31-46
    DOI: 10.1080/13691066.2023.2178348
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