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Economic Change and Restructuring

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09-08-2023

The impact of government subsidies on corporate resilience: evidence from the COVID-19 shock

Authors: Ting Feng, Zhongyi Xue

Published in: Economic Change and Restructuring | Issue 6/2023

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Abstract

In the face of complex and changeable uncertain environments, corporate resilience is the crucial foundation for survival and sustainable development, and enhancing corporate resilience becomes an important goal for governments. In this context, this paper investigates the impact of government subsidies, as a typical government tool, on corporate resilience in crises. Based on the panel data of 2315 listed companies in China Shanghai and Shenzhen A-share market during the COVID-19 pandemic, this paper finds that: (1) government subsidies received before and during the crises can both enhance corporate resilience in crises. (2) Government subsidies enhance corporate resilience by alleviating financial constraints and boosting confidence. (3) The crises improve the efficiency of subsidies used by corporates, resulting in the enhancement of subsidies received during the crises being more pronounced than those received before the crises. This paper deepens the understanding of government subsidies' roles in crises, enriches the literature on government subsidies and corporate resilience, and provides a reference for improving government subsidies policy and enhancing corporate resilience. The government should increase government subsidies to mitigate the negative impact of uncertainty shocks on corporates and improve corporates' ability to respond to risks, and pay attention to the timing of subsidies to maximize the efficiency of government subsidies at the same time.

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Shanghai and Shenzhen A-share listed companies are required to disclose the amount and purpose of government subsidies regularly. During the COVID-19 pandemic, although the temporary subsidies have increased, the subsidies provided to promote enterprise innovation and industrial development have not decreased.

Source: Authors, data extracted from the disclosure of government subsidies in the annual financial reports of listed companies.

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Title: The impact of government subsidies on corporate resilience: evidence from the COVID-19 shock
Authors: Ting Feng
Zhongyi Xue
Publication date: 09-08-2023
Publisher: Springer US
Published in: Economic Change and Restructuring / Issue 6/2023
Print ISSN: 1573-9414
Electronic ISSN: 1574-0277
DOI: https://doi.org/10.1007/s10644-023-09552-2

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