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- Title
Are private equity and venture capital helping small and medium-sized enterprises during the COVID-19 pandemic? Evidence from China.
- Authors
Yang, Song
- Abstract
The rapid spread of COVID-19 worldwide since 2020 has, undeniably, negatively influenced the global economy and environment. Small and medium-sized enterprises (SMEs) are among the worst-hit victims of COVID-19, particularly in developing countries. As primary channels financing SMEs, what roles have private equity and venture capital (PE/VC) played in this crisis? Using the 2010–2021 data of 4462 listed companies, we aimed to assess the impact of PE/VC on financial risk among Chinese SMEs. We constructed a capital structure selection model to assess the risk preference of PE/VC and explored the roles of PE/VC in the financial risk management of enterprises during COVID-19. Based on both theory and empirical evidence, PE/VC negatively impacts the financial risk of enterprises, implying that intervention by the management of PE/VC can aggravate the financial risk. However, in reality, PE/VC positively impacted enterprise financial risk during COVID-19. Thus, the government should implement some easing policies to stimulate access and investment policies of PE/VC as well as provide more practical policies to support investment institutions in China and other counties.
- Subjects
CHINA; FINANCIAL risk; VENTURE capital; SMALL business; PRIVATE equity; COVID-19 pandemic; FINANCIAL risk management
- Publication
Economic Analysis & Policy, 2022, Vol 76, p1
- ISSN
0313-5926
- Publication type
Article
- DOI
10.1016/j.eap.2022.07.007