Etla research | The vast majority of companies that received corona support would have remained profitable even without it

The greater part companies that received corona support would not have needed support, because they would have remained profitable even without it. The matter emerges from a study by the Institute for Economic Research, Etla, which examines the allocation of business subsidies introduced as a result of the corona crisis to different companies.

In addition, according to the study, companies that were already losing money before the corona pandemic received corona subsidies even more often than other companies.

According to the study, corona subsidies made only very few companies profitable.

“The results related to profitability are very interesting, because they are strongly related to bankruptcy risk,” says Etla's research manager, who was responsible for the study, in the press release Olli Ropponen.

Etlan according to it is worth noting that subsidies were systematically targeted more often to less productive companies and to companies that do not seem viable even in normal times. According to the study, the artificial preservation of unproductive activity has a detrimental effect on future productivity development.

“It is worrisome that the subsidies targeted companies with below median productivity more often than others. This affects future productivity negatively, because labor and capital are more likely to remain in companies with lower productivity instead of moving to more productive activities,” says Ropponen in the press release.

“In the same breath, it must be stated that, of course, the subsidies mostly aim to maintain operations.”

The study states that, based on international economic literature, business subsidies have succeeded in increasing employment and reducing the probability of business closure. However, according to the research, the effects of subsidies have often been greater for small companies than for large companies.

The study is part of the Ministry of Labor and the Economy's extensive evaluation series of corona subsidies in the years 2020–2024.