Mitigating Financing Constraints under Economic Uncertainty: The Role of Implicit Government Guarantees in China

Bi, Sifeng; Wei, Na; Du, Anna Min; Zhou, Tiran

Abstract

In the context of economic policy uncertainty (EPU), firms face significant financing constraints, especially in accessing credit. To address this, governments often provide implicit government guarantees (IGG) to alleviate these constraints. This study examines the effects of EPU on firm credit financing activities from an IGG perspective, using a sample of Chinese A-share listed firms from 2010 to 2020. The findings indicate that EPU negatively impacts firm credit financing activities, but the presence of IGG mitigates these effects. The heterogeneous analysis reveals that IGG primarily benefits firms taking more risks or facing severe financial constraints. Regionally, IGG is more effective in provinces with lower marketisation and higher fiscal strength, helping distressed firms secure more bank credit at lower costs. These results have important implications for policymakers, shareholders, and stakeholders regarding the role of IGG in moderating the impact of EPU on firm credit financing activities.

Citation

Bi, S., Wei, N., Du, A. M., & Zhou, T. (2025). Mitigating Financing Constraints under Economic Uncertainty: The Role of Implicit Government Guarantees in China. Research in International Business and Finance, 76, Article 102819. https://doi.org/10.1016/j.ribaf.2025.102819

• Journal Article Type: Article
• Acceptance Date: Feb 19, 2025
• Online Publication Date: Feb 20, 2025
• Publication Date: 2025-04
• Deposit Date: Feb 24, 2025
• Publicly Available Date: Aug 21, 2026
• Journal: Research in International Business and Finance
• Print ISSN: 0275-5319
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 76
• Article Number: 102819
• DOI: https://doi.org/10.1016/j.ribaf.2025.102819
• Keywords: Economic Policy Uncertainty (EPU), Implicit Government Guarantees (IGG), Credit Financing, Financial Constraints
• Public URL: http://researchrepository.napier.ac.uk/Output/4128136