A Study on the Characteristics and Financial Performance of Kosdaq Small Companies that have Raised Debt from Government

The purpose and scope of this paper are twofold: first, exploring the characteristics of the small companies that have borrowed from government and second, evaluating financial performance of those companies receiving the financial support. We have reviewed KOSDAQ listed companies to evaluate the firm characteristics and their financial performance. The results of this paper can be summarized as follows: First, when the firms are classified into ventures and SMEs (small-medium-size) enterprises, both firms with declining trend in debt-to-equity ratio excluding government loan show a relatively high dependence on the government loan. On the other hand, the both firms that are in the upward trend in terms of asset size show that they are less dependent on the government loan. Lastly, when the financial performances of venture firms and SMEs are empirically investigated, it suggests that the government loans do not reflect positive effects on financial performance in terms of ROE and ROA. This result is not in line with our expectation that government agency and financial institutions role in selecting and monitoring investment are highly enforced so that these tremendous amounts of public money invested into venture firms are not wasted