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The effect of impact investing on performance of private firms

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  • Ichev, Riste
  • Valentinčič, Aljoša

Abstract

This study empirically examines the effectiveness of impact investing of private firms in Slovenia. We use a sample of 7671 distinct private firms during the 2005–2020 period applying for and eventually receiving various government grants. This allows us to identify firms with the intent to impact-invest. We employ the staggered difference-in-difference (SDiD) approach recently proposed by Baker et al. (2022) and Athey and Imbens (2022) to assess the outcomes of these investments over time and across firms. SDiD allows for firms switching back and forth between receiving and not receiving grants and thus being a treated observation or a potential control observation respectively. Our results show that firms receiving an impact investing grant, on average, increase the number of employees in the subsequent period, generate higher cash flows from operations, increase value added per employee, make higher capital investments, have higher levels of exports, but grants hinder firm productivity in the short-run. PSM, the time-varying average treatment effects, and Heckman’s two-stage approach robustness analyses further support the conclusions that the impact investing grants successfully foster firm performance.

Suggested Citation

  • Ichev, Riste & Valentinčič, Aljoša, 2025. "The effect of impact investing on performance of private firms," Research in International Business and Finance, Elsevier, vol. 73(PA).
    • Handle: RePEc:eee:riibaf:v:73:y:2025:i:pa:s0275531924003799
    DOI: 10.1016/j.ribaf.2024.102586
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    More about this item

    Keywords

    Impact investing; financial grants; firm performance; investment policy; private firms;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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