Effects of the matching fund program on IPO and bankruptcy of SMEs in Korea

In Seok Heo, So Young Sohn, Eun Jeong Ji

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

Most small and medium enterprises (SMEs) in Korea struggle in financing R&D. Thus, the Korea Core Industrial Technology Investment Association (KITIA) was established to implement a matching fund program (MFP) to help SMEs with this undertaking. Applicant firms to the MFP are reviewed first based on their technology levels and are required to attract financing from venture capitalists (VCs), before receiving funds from the MFP. This paper, based on KITIAs MFP applicant data from 2001 to 2004, evaluates the performance of the MFP in terms of the success rate of funded SMEs' initial public offerings (IPOs) and bankruptcy rates in relation to those SMEs that could not attract matching funds. Propensity score matching was used to eliminate selection bias from the data in order to assess the actual treatment effect of the MFP. According to the result of logistic regression applied to the matched data, MFP apparently did not have significant effects on IPO success and bankruptcy. This implies that MFP needs to allow VCs more time to evaluate SMEs covering qualitative aspects as well. It is expected that this change of structure can provide better performance of MFP in terms of IPO success and bankruptcy of matched SMEs.

Original languageEnglish
Pages (from-to)117-129
Number of pages13
JournalSmall Business Economics
Volume42
Issue number1
DOIs
Publication statusPublished - 2014 Jan 1

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Korea
Bankruptcy
Initial public offerings
Small and medium-sized enterprises
Financing
Venture capitalists
Propensity score matching
Logistic regression
Selection bias
Treatment effects
Technology investment

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics and Econometrics

Cite this

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Effects of the matching fund program on IPO and bankruptcy of SMEs in Korea. / Heo, In Seok; Sohn, So Young; Ji, Eun Jeong.

In: Small Business Economics, Vol. 42, No. 1, 01.01.2014, p. 117-129.

Research output: Contribution to journalArticle

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