engleski

The Effects of the Global Financial Crisis on Debt Financing: Croatia Vs Macedonia

The bank-centric nature of the financial systems in Croatia and Macedonia, inherited from their previous economic arrangement under the socialist Yugoslav paradigm, was severely tested with the emergence of the Global Financial Crisis of 2007-2009. Both countries had experienced a boom in economic activity at the beginning of the new millennium, thus neglecting the potential dangers which the bank-centric structure posed to the entire economic system. This paper attempts to examine the evolution of debt financing, given that banks are the primary source of financing the nascent entrepreneurial activity in these two countries. Taking into consideration the ownership structure of the leading banks and the involvement of their European parent companies in the Wall Street turmoil, the authors research their impact on debt financing patterns in Croatian and Macedonian companies, respectively. This is especially in relation to the structural break in 2008, the time at which the Global Financial Crisis spilled over in this region. The objective of this study is to compare and contrast the lending behavior of banks to companies and their influence on the further development of the national economies on their way to emerging on the world stage. The economic and financial data for each country will be separately analyzed and the respective results mutually compared, while keeping in mind the different levels of socio- economic development and the initial stage of their model of credit financing to the private sector. The purpose of this work is to contribute to the growing literature examining the specific lending patterns in segmented markets and identify the key areas which need improvement in both countries. The expected results of the conducted research can be found in the empirical methods such as time series analysis used to examine bank financing patterns to the private sector. Considering the importance of the relationship between credit financing of companies and its influence on the comprehensive development of the fragile and unbalanced economies of the two countries under observation, the conclusions of this study should prove the link between bank credit activity and the dynamics of company development, and ultimately the development of the national economies. This paper aims to provide an additional assessment of the impact of the Global Financial Crisis on debt financing and is addressed to the broad scientific and professional community.

financial crisis ; debt financing ; banks ; entrepreneurship

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