engleski

Capital Formation Financing and Foreign Direct Investment in Croatia

The main idea of the paper is that sources of finance in transition economies are insufficient to finance investments which would translate into sustainable economic growth. The most obvious reason for that is a risk-averse banking sector and underdeveloped capital markets. Foreign direct investments (FDI) are specific external sources of finance which consist not only of capital, but they also incorporate know-how of foreign direct investor. FDI have proved to be a decisive factor able to restructure an economy more intensely than the domestic enterprises do. After the introduction, in the first part of the paper the authors apply a regression analysis to the problems of firms' financing. In a next step an analysis of the Croatian banking sector and of developments of FDI to Croatia in a comparative context with other transitional economies is provided. Those analyses point to the fact that the potential of FDI in Croatia has not been fully utilised. After having described the limitations of FDI inflow to Croatia, the authors give an outlook of possible solutions to overcome these problems.

financing sources; banking sector; capital formation financing; restructuring; Croatia; transition economies; foreign direct investments; economic growth

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