Corporate finance and the governance implications of removing government support programs

Martin Jacob, Sofia Johan, Denis Schweizer , Feng Zhan

Research output: Contribution to journalArticlepeer-review

17 Citations (Scopus)


Governments worldwide spend trillions of dollars on business support programs. This article examines the
implications to investors of phasing out one of these subsidy programs. Our setting takes advantage of a unique quasi-natural experiment, where tax subsidies for Canadian Labour-Sponsored Venture Capital Corporations (LSVCCs) were phased out in one province but not in others. Using a difference-indifferences setting, we show that fund performance—unrelated to the tax credit—decreased substantially following the enactment of the phase-out. We further show empirically that LSVCC managers continued to charge venture capital-like management fees, despite the fact that their investment strategies become more similar to mutual funds. Our data strongly support the idea that investors in companies and/or funds that unexpectedly lose government support face significant financial costs
Original languageEnglish
Pages (from-to)35-47
Number of pages13
JournalJournal of Banking and Finance
Early online date10 Nov 2015
Publication statusPublished - Feb 2016


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