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

Author

Listed:
  • Rouvinen, Petri
  • Ylhäinen, Ilkka

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.

Suggested Citation

  • Rouvinen, Petri & Ylhäinen, Ilkka, 2025. "Finnish Business Finance in European Comparison: Money is Not the Key Bottleneck to Economic Growth," ETLA Reports 161, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:report:161
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    More about this item

    Keywords

    Business finance; Financial constraints; Debt finance; Economic growth;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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