Persistence of government funding in small business finance

Ilkka Ylhäinen

No 1232, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: This paper studies the interaction of Finnish manufacturing firms and a state-owned specialized financing company, whose objective is to cure credit market imperfections. The study ex-amines how the presence of such agency affects the behavior of the firms over time. Specifically, the study analyzes whether the observed persistence in the subsidized financing originates from true state dependence or unobserved firm-specific heterogeneity. The results show that there is positive state dependence in the granted government loans and guarantees. The findings indicate that the private sector agents may adjust their financing behavior in response to the government intervention in the credit markets. The unobserved firm-specific heterogeneity accounts for much of the observed persistence, which provides another reason for why some firms are more dependent on the government funding than the others.

Keywords: Julkisen; yritysrahoituksen; pysyvyys (search for similar items in EconPapers)
JEL-codes: G21 G24 G32 H81 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2010
New Economics Papers: this item is included in nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.etla.fi/wp-content/uploads/2012/09/dp1232.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rif:dpaper:1232

Ordering information: This working paper can be ordered from
https://www.etla.fi/en/publications/dp1232-en/

The price is 10€.

Access Statistics for this paper

More papers in Discussion Papers from The Research Institute of the Finnish Economy Contact information at EDIRC.
Bibliographic data for series maintained by Kaija Hyvönen-Rajecki ().