Abstract
With the outbreak of COVID-19, governments worldwide have provided direct subsidies to enterprises. This paper aims to identify the motivation behind these subsidies and evaluate their impact. Previous studies have overlooked the discussion of subsidy motivation, and there is still a wide divergence of views among scholars on whether subsidies have a positive effect on firm performance. To test the hypothesis, a fixed effect model is adopted. The study examines 228 Chinese A-share listed companies and confirms that subsidies are primarily attributable to the severity of the pandemic. Moreover, subsidies have a significant positive effect on social performance, particularly for small-scale enterprises. Contrary to the belief that subsidies have a positive effect on firm performance, this study disproves this viewpoint. The research findings provide a theoretical basis for subsidy policy-making during pandemics and outline the boundaries of government intervention in society and the economy.