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

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.

KEYWORDS:

• Difference-in-differences method
• SMEs
• financing constraints
• fiscal policy
• COVID-19

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Fujian Provincial Department of Science and Technology under Grant number 2022R0064; Fujian Provincial Social Science Federation under Grant number FJ2022C050 and the Ministry of Education of the People’s Republic of China Humanities and Social Sciences Youth Foundation n under Grant number 22YJC910014.