One commonly mentioned rationale for public funding is its positive signaling effect, often called the “halo-effect”, to the private sector financial institutions about the quality of the firm. This is based on the market failure argument based on the existence of asymmetric information...

Not unlike elsewhere, the government in Finland has been keen to provide funding to Finnish firms, especially to small and medium-sized enterprises (SMEs). In this paper we review, in the light of the economic rationales for public efforts to finance SMEs, all of the government institutions...

The Finnish government, in addition to providing finance to SMEs, has established a number of support mechanisms that provide assistance to SMEs via free or subsidized business support services. In this paper, we review the public organisations providing business services, and the instruments...

We study the capital market implications of mandatory auditor choice. This regulatory intervention provides us with an instrument that can be used to examine the role of asymmetric information in the market for small business finance. We propose, in particular, a new exogenous measure of...

Despite the voluminous and growing literature on financial constraints, the origins of the constraints are hardly ever empirically analyzed. This paper offers such an analysis. We study, in particular, the empirical prevalence of adverse selection and moral hazard in capital markets using a...

This paper examines empirically how firm ownership structure affects its research- and development (R&D) intensity. To begin with, a principal-agent problem created by the separation of the management of a firm (the agent) and its ownership (the principal) is reviewed, and prior empirical...

In this paper we study a horizontally differentiated market for financial in-termediation and develop a simple explanation for concentration in the financial intermediation industry. We show that under asymmetric information, if the demand for funds is not perfectly elastic, the heterogeneity of...

In many industries, including telecommunications, a government decision on a standard is needed for the society to reap the benefits from the diffusion of new goods. Delays induced by regulatory bodies either in standard choice or its implementation can be extremely costly. I study...

Mobile phones are increasingly used as a gateway to the Internet. The take-up of mobile phone-enabled Internet services was, however, initially slower than expected, at least in Europe. We estimate non-parametrically the price elasticities of demand for first-generation wireless services using...

This paper provides evidence that capital market imperfections hold back innovation and growth, and that public policy can complement capital markets. We deliver the evidence by studying the effects of government funding on the behavior of SMEs in Finland. By adapting the methodology recently...