Sailing through Troubled Waters: Evidence from the APOIAR Program

We exploit the assignment mechanism of the APOIAR Program, a targeted initiative aimed at supporting the firms most affected during the COVID-19 pandemic, to provide causal evidence on the impact of grants on firm survival and performance in times of crisis. Using sharp and fuzzy regression discontinuity designs and drawing on a combination of administrative datasets, we find that eligible firms experienced a short-term increase in profitability in 2021, with €1 of support increasing net income by €0.658. However, these effects did not persist in 2022, and we found no significant changes in turnover or cost reduction, indicating that the increase in profitability was mechanically due to the subsidy. Firms allocated part of the grant to rental payments and purchases of office supplies, including modest investments in digitalization. Our findings suggest that these funds were particularly important for ex-ante less productive and more indebted firms.