A Firm-level Analysis of Small and Medium Size Enterprise Financing in Poland
World Bank, Development Research Group, Finance Team, 2006 - Service industries - 42 pages
"The authors test competing theories of capital structure choices using firm-level data on firm borrowings. The majority of firms in the dataset are privately owned, young, micro or small and medium enterprise (SME) firms concentrated in the service sector. In general, the financing pattern of firms is low leverage ratios and, in particular, low levels of intermediated financing and long-term financing. Average firm growth rates decreased during the five years of the sample period. Average profitability growth ratios are also negative across age and sectors and large firms have the highest negative profit growth rates. Statistical tests find a positive firm size effect on financial intermediation. Larger firms have higher leverage ratios (both short term and long term), including higher use of trade credit. There is also a negative influence of profitability on leverage ratios (more profitable firms use less external financing), which supports the "pecking order" theory that in environments with greater asymmetric information (such as weaker credit information) firms prefer to use internal or inter-firm financing. Finally, firms operating in a competitive environment have higher leverage ratios. For instance, young, small firms are the most active employment generators in the Polish economy. In particular, the authors find that although SMEs seem to be very active in creating jobs in recent years. This suggests that a new type of firm is emerging that is more market and profit-oriented. But at the same time, these firms appear to have financial constraints that impede their growth. Improvements in the business environment, such as better credit and registry information, could help promote growth in this sector. "--World Bank web site.
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analysis Asset Tangiblility assets ratios asymmetric information Audretsch August 2006 August average capital structure collateral constraints Current Ratio debt financing debt to assets debt to toul Debt/Asset employment growth rates external financing financial distress financial structure financing decisions firm characteristics firm-level firms exhibit firms with non-missing fixed effects foreign funds high-growth firms information asymmetries interest coverage intermediated financing investors July 2006 July large firms larger firms Liabilities to total Limited Liability Partnerships long-term financing median micro firms negative observe ownership information percentage of firms Poland Polish firms Pooled OLS regression private domestic firms profitability ratios Research Working Paper Return on Assets Romania Sales PLN sample period service sector short-term debt Slaskie small firms SME Financing SME sector SMEs in Eastern SOEs STOT Summary Statistics Table tax shields total assets trade credit financing transition economies unbalanced sample variables Wielkopolskie World Bank Yes Yes Yes younger firms