Template-Type: ReDIF-Paper 1.0
Author-Name: Eszter Balogh
Author-X-Name-First: Eszter 
Author-X-Name-Last: Balogh
Author-Name: Adám Banai
Author-X-Name-First: Adám 
Author-X-Name-Last: Banai
Author-Name: Tirupam Goel
Author-X-Name-First: Tirupam 
Author-X-Name-Last: Goel
Author-Name: Péter Lang 
Author-X-Name-First: Péter   
Author-X-Name-Last: Lang
Author-Name: Martin Stancsics 
Author-X-Name-First: Martin 
Author-X-Name-Last: Stancsics 
Author-Name: Előd Takáts 
Author-X-Name-First: Előd 
Author-X-Name-Last: Takáts
Author-Name: Álmos Telegdy
Author-X-Name-First: Álmos 
Author-X-Name-Last: Telegdy
Title: Credit constrained firms and government subsidies: evidence from a European Union program
Abstract: We assess the effects of non-repayable subsidies on financially constrained and unconstrained Hungarian SMEs. Using rejected subsidy applicants as control group and bank queries to the credit-registry to identify firms that applied for but did not receive a loan, we show that subsidies generate a sizeable incremental impact on asset growth of constrained firms relative to unconstrained businesses. This effect, however, is transitory and does not translate into higher sales, profitability or productivity. Financing, therefore, may not be the primary hurdle for these SMEs, and credit constraints may reflect other shortcomings, such as lack of good management or viable projects.
Length: 43 pages
Creation-Date: 2021-11
File-URL: https://www.bis.org/publ/work984.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work984.htm
File-Format: text/html
Number: 984
Keywords: SMEs, subsidies, credit constraints, emerging market economies, difference-in-differences, credit registry micro-data
Classification-JEL: G38, G21, E58
Handle: RePEc:bis:biswps:984