The Impact of EU Grants from Operational Programme Competitiveness and Cohesion 2014-2020 on the Financial Performance of Manufacturing Industry in Croatia

The aim of this paper is to analyse the impact of EU grants on the financial performance of manufacturing companies in Croatia during the 2014-2020 programming period. The focus of the paper is on researching how grants from the Competitiveness and Cohesion Operational Programme 2014-2020 influenced key financial indicators such as profitability, liquidity, business stability and financial efficiency. A panel analysis of data on a sample of Croatian small and medium-sized enterprises over a six-year period (2017-2022) confirmed that grants, observed at the company level, have a positive impact on newly created value, while the impact on profitability and efficiency is not significant in the short term. Grants only created new value for the analyzed companies by reducing material costs while increasing debt and decreasing financial stability without significantly increasing profitability, liquidity and asset utilization efficiency in the short term. The negative impact of grants on certain variables in the short term can be seen as an investment in future growth and development, which implies a positive effect on long-term sustainability and business success. In the long term, grants can serve as a prerequisite for the growth and development of companies, but the shorter time lag between investments financed by grants and returns results in moderate effects on the financial performance of companies. The results and conclusions should be considered taking into account the main limitations of the study, namely the small sample size and the focus on a short time period. However, this does not affect the significance and importance of the conclusions. This paper contributes to science by presenting results on the effectiveness and importance of EU grants for manufacturing companies in Croatia.