The Impact of Government Subsidies on Company Debt Financing: New Evidence from Chinese Listed Companies

Based on a sample of listed companies in the Chinese A-share market from 2007 to 2016, this paper examines the impact of government subsidies on the debt financing of companies. The empirical results show that government subsidies have a significant surplus improvement effect on the company debt financing scale, and the surplus improvement effect is more significant than the implicit guarantee effect on the company debt financing scale. Meanwhile, government subsidies have a significant implicit guarantee effect on the costs of debt financing, and the implicit guarantee effect is more significant than the surplus improvement effect on the costs of debt financing. Further studies indicate that in companies with internal financing gaps, government subsidies have a significant surplus improvement effect on the debt financing scale and a significant implicit guarantee effect on debt financing costs.