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Financing enterprises in the Czech Republic: the importance of firm-specific variables

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  • Debora REVOLTELLA

    ([n.a.])

Abstract

This paper investigates the effects of firm specific variables on indebtedness, and thus financing decisions. A structural equation model with latent variables is estimated to show how size, profitability, foreign partnership, volatility of earnings, collateral availability and growth potential affect total, short term and bank indebtedness for each firm. The main results concern the role of size and growth in determining the availability of credit to enterprises. It is also shown that the most profitable firms, owing to high costs of credit and general market inefficiencies, prefer to use internal resources and thus neglect credit markets. When distinguishing among different forms of debt, bank debt seems to be the one that imposes the strongest financial discipline on enterprises. Evidence is provided for a change in allocation policies of banks. The empirical evidence suggests some policy conclusions. It is noted that if banks have the right incentives (and the legal regulation of property should reinforce them), they are the best engine for transformation of the industrial sector. Furthermore, the paper suggests that small and medium enterprises should be provided with financial support, given that these productive units are strongly discriminated against in the official credit market.

Suggested Citation

  • Debora REVOLTELLA, 1998. "Financing enterprises in the Czech Republic: the importance of firm-specific variables," Working Papers 102, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    • Handle: RePEc:anc:wpaper:102
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    File URL: http://docs.dises.univpm.it/web/quaderni/pdf/102.pdf
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    Cited by:

    1. Hillier, G.H., 1995. "The union of best critical regions: complete classes, p-values, and model curvature," Discussion Paper Series In Economics And Econometrics 9503, Economics Division, School of Social Sciences, University of Southampton.
    2. Blackburn, K. & Hung, V.T.Y., 1993. "A theory of growth, financial development and trade," Discussion Paper Series In Economics And Econometrics 9303, Economics Division, School of Social Sciences, University of Southampton.
    3. Colombo, E., 1999. "The capital structure of Hungarian firms," Discussion Paper Series In Economics And Econometrics 9903, Economics Division, School of Social Sciences, University of Southampton.
    4. Dimiter Rafailov, 2003. "Determinants of the capital structure of the Bulgarian firms," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 47-65.
    5. Goerke, Laszlo, 1996. "Taxes on Payroll, Revenues and Profits in Three Models of Collective Bargaining," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(5), pages 549-565, November.
    6. James M. Malcomson, 1997. "Contracts, Hold-Up, and Labor Markets," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 1916-1957, December.
    7. Ulph, A., 1994. "Strategic environmental policy, international trade and the single European market (forthcoming in environmental policy with economic and political integration, Edward Elgar)," Discussion Paper Series In Economics And Econometrics 9403, Economics Division, School of Social Sciences, University of Southampton.
    8. Herrendorf, Berthold & Valentinyi, Akos & Waldmann, Robert, 1998. "Ruling out Indeterminacy: the Role of Heterogeneity," CEPR Discussion Papers 1858, C.E.P.R. Discussion Papers.
    9. Emilio Colombo, 2001. "Determinants of corporate capital structure: evidence from Hungarian firms," Applied Economics, Taylor & Francis Journals, vol. 33(13), pages 1689-1701.
    10. Balla, Andrea, 2006. "Tőkeszerkezeti döntések - empirikus elemzés a magyar feldolgozóipari vállalatokról 1992-2001 között [Decisions affecting capital structure - an empirical analysis of Hungarian manufacturing firms i," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 681-700.

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