Is the Government's Direct Subsidy to Covid-19 Effective?

In the context of COVID-19 outbreak, governments around the world have provided direct subsidies to enterprises. The purpose of this paper is to identify the motivation of subsidies and test the effect. Previous studies ignored the discussion of subsidy motivation. Moreover, there still remains a wide divergent of the view that subsidies have a positive effect on the firm performance among scholars. A linear regression model is conducted to test the hypothesis. Results of the study on 441 Chinese A-share listed companies confirm that the severity of the pandemic is attributable primarily to subsidies. Besides, subsidies have a significant positive effect on social performance, which is more obvious in small-scale enterprises. In addition, the viewpoint that subsidies have a positive effect on the firm performance is disproved. Findings from the research provide theoretical basis for subsidy policy-making of the pandemic, and delineate the boundary of government intervention in society and economy.