Is the government's direct subsidy to COVID-19 effective?

Area of Science:

• Economics
• Public Policy
• Business Management

Background:

• Governments globally issued enterprise subsidies during the COVID-19 pandemic.
• Existing research lacks consensus on subsidy motivation and impact on firm performance.

Purpose of the Study:

• To investigate the drivers behind government subsidies to enterprises during the COVID-19 outbreak.
• To evaluate the effect of these subsidies on firm performance, particularly social performance.

Main Methods:

• Utilized a fixed-effect model for analysis.
• Examined data from 228 Chinese A-share listed companies.

Main Results:

• Pandemic severity was the primary motivation for subsidy allocation.
• Subsidies positively impacted social performance, with a notable effect on small enterprises.
• Subsidies did not yield a significant positive effect on overall firm financial performance.

Conclusions:

• Subsidy allocation is linked to pandemic severity, offering a theoretical basis for future policy.
• Government intervention through subsidies benefits social performance but not necessarily financial firm performance.
• Findings delineate the scope of government intervention in economic and social spheres during crises.