A study of direct business subsidy allocation in Finland
School of Business | Master's thesis
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AbstractThis thesis examines the allocation of direct business subsidies given by Business Finland between the years 2008 and 2019. Business subsidies are a useful tool for the public sector to create positive social returns by providing resources for the firms suffering from a shortage of private investments due to market failure. Business subsidies have been shown to have a positive impact on the growth of the target firms and so the growth of the economy but what is little known is about how subsidies are allocated in the economy. More specifically, what are the characteristics of companies which apply for subsidies and whose applications are approved. This study uses probit regression analysis to answer these questions. The results show size of the firm to have positive impact while age and profitability to have negative impact on the probability of applying. In addition, firms who have applied for business subsidy at least once or received at least one business subsidy in the previous fiscal years have a higher probability to apply for a subsidy on a given year. In addition, the results show that the number of applications submitted and profitability on a given year have a positive impact on the probability of a firm receiving a subsidy. The results suggest that firms who have applied for subsidies before are more active to apply for subsidies in the future which leads to a higher probability of receiving a subsidy.
Thesis advisorToivanen, Otto
business subsidy, subsidy, economic growth, government intervention, government policy