The Impact of Government‐Guided Funds on Enterprises Innovation Quality: Evidence From China

ABSTRACT This study examines the impact of China's government‐guided fund policy on corporate innovation quality from a venture capital perspective. It holds significant implications for comprehensively understanding the economic effects of government venture capital and the realization of sustainable development of enterprises. Using a multi‐period difference‐in‐differences (DID) approach, we analyze data from A‐share‐listed firms in Shanghai and Shenzhen (2008–2023) to empirically assess how government‐guided funds influence enterprises innovation quality. Results show that firms receiving such investments exhibit a statistically significant improvement in their innovation quality. The effect is more pronounced among firms facing higher financing needs, including growth‐stage enterprises, strategic emerging industries, and Nonpolitical connections enterprises. Mechanism analysis further reveals that government‐guided funds enhance enterprises innovation quality by alleviating financing constraints and lowering agency costs.