AN EMPIRICAL EXAMINATION OF FIRMS’ FINANCING CONDITIONS IN TRANSITION COUNTRIES

Abstract

The paper uses survey data to analyse the financing conditions of firms in transition countries. The results show that small firms have considerably more problems with access to and cost of finance than larger firms. Small firms also display markedly different financing patterns than large firms, relying to a much greater extent on internal financing sources and less on bank credit or other sources of formal finance than large firms. To examine the determinants of access to and cost of finance the survey data are combined with macro and financial variables in an ordered logit model. The results indicate that a heavy reliance on foreign and state-owned banks has adverse effects on the average firm’s financing condition.

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