Finnish Business Finance in European Comparison: Money is Not the Key Bottleneck to Economic Growth

Petri Rouvinen and Ilkka Ylhäinen

No 161, ETLA Reports from The Research Institute of the Finnish Economy

Abstract: Abstract Finnish businesses face fewer financial challenges than their European peers. To the extent financial challenges do exist, they disproportionately affect young, small, innovative, internationally focused, and growth-seeking companies. Our findings are based on extensive firm-level data. The data and our approach dictate that the results should be interpreted from the point of view of a representative firm and from a long-term, structural perspective, with a focus on debt financing. Finland’s financing challenges stem primarily from equity, not debt. The nation’s bank-centric financial system inadequately supports growth driven by intangible assets. Moreover, the growth ambitions and abilities of company owners, boards, and executives leave something to be desired. We posit that Finland’s fundamental issue is demand, not supply, of financing. Capital availability is sufficient. The core problem is insufficient initiative in identifying, capitalizing on, and scaling new ideas.

Keywords: Business finance; Financial constraints; Debt finance; Economic growth (search for similar items in EconPapers)
JEL-codes: E22 G30 G32 O16 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2025-04-08
New Economics Papers: this item is included in nep-eec and nep-sbm
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