Impacts of government R&D subsidies on venture capital and renewable energy investment - an empirical study in China

Renewable energy investment (REI) is of great significance to achieve green development, but its heavy dependence on government subsidies resulting in financial constraints and lacking market efficiency, hindering its sustainable development. In this paper, the objective is to study the direct influence and the signal effect of government research and development (R&D) subsidies on REI in the Chinese context. Based on the data of Chinese listed renewable energy (RE) companies from 2009 to 2015, the ordinary least squares (OLS) method is used to evaluate the effect of government R&D subsidies policy on REI and the role of ownership attribute differences played in this impact. Furthermore, using the propensity scores matching (PSM) method to study whether government R&D subsidies could serve as a signal for venture capital (VC) and increase REI. The results show that government R&D subsidies can effectively accelerate REI, while taking ownership differences into consideration, this effect was just statistically significant in state-owned enterprises (SOEs). Moreover, receiving government R&D subsidies could increase the likelihood to obtain VC which would boost REI at a level of 1.086 billion yuan after eliminating the sample selection bias. The contribution of this paper is to combine the government policy and the capital market together to guarantee PEI's gradual weaning from the government support and function well.