Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/318854 
Year of Publication: 
2025
Citation: 
[Journal:] Journal of Business Economics [ISSN:] 1861-8928 [Volume:] 95 [Issue:] 1 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2025 [Pages:] 103-154
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
This paper examines the financing situation of young firms in Germany after receiving public funding. I find that, on average, public funding is associated with a significant reduction in the future probability of experiencing financial constraints. While grant tend to improve relationships with equity investors, subsidized loans or loan guarantees tend to improve relationships with external providers of both equity and debt capital. Additionally, I show that the effect of public funding is stronger for more financially constrained firms when provided as a subsidized loan or loan guarantee, and heterogeneous across entrepreneurs and startups. Furthermore, my results suggest that public funding is positively related to real outcomes, and that grants also help firms by stabilizing their economic position.
Subjects: 
Public subsidies
Financial constraints
Subsidized loans
Loan guarantees
Grants
Young firms
JEL: 
G38
H81
O38
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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