Financial Constraints: State Aid to the Rescue? Empirical Evidence from Belgian Firm-Level Data

摘要

This paper investigates the relationship between State aid measures, as defined by Article 107 of the Treaty on the Functioning of the European Union (TFEU), and firm performance in terms of total factor productivity (TFP). Under imperfect capital markets, firms might encounter difficulties in accessing sufficient resources to fund their optimal investment plans. The main focus of this paper lies in establishing whether State aid alleviates a firm from such constraints, and thereby enhances its productivity. To this end, we include all State aid cases that were active in Belgian manufacturing between 2003 and 2012. To determine the effects of State aid and financing constraints on performance, we first estimate TFP and classify firms according to their financial health in the absence of aid. The main results confirm the hypothesis, but when allowing for firm heterogeneity, a mitigating role for State aid is only present for initially well-performing firms.