Scholarly record

AVAILABILITY OF EXTERNAL SOURCES OF FINANCE FOR SMALL AND MEDIUM – SIZED ENTERPRISES IN THE SLOVAK REPUBLIC

K. Belanova

Abstract

Investment decision - making has acquired the importance in the economy of the Slovak Republic especially in connection with its transition to a market one. It is connected with a long-term time horizon, and a badly focused and inefficient investment can lead the company not only to financial problems, but even to bankruptcy. In SMEs, the success of the investment, sometimes involving all of its own capital, can decide on their further existence. In addition to investment decisions that solve the question of which investment project to choose, the company also decides which sources of finance it will use for financing of the prospective investment. It is obvious, that if financial sources are insufficient, the companies will not invest. The aim of the article is to survey whether SMEs in the SR are confronted with the financial constraints in investment process. The empirical analysis uses firm – level data and covers 327 SMEs in the SR. It was carried out in 2016. We used the accelerator model to which we added an internal – funds variable for testing the argument that if the SMEs are financially constrained, their investments may be sensitive to internal funds. We find supportive evidence for the fact that surveyed companies have faced financing constraints in the SR. In contrast to theoretical indications, by testing the impact of age of the SMEs on the investment – cash flow sensitivity we find that investment of both young and old SMEs is not sensitive to internal funds.

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