Determinants of the Financing Obstacles Faced by SMEs: An Empirical Study of Emerging Economies

Abstract

Ab stract: Small and medium sized enterprises (SMEs) play a crucial role \nin the economic development of emerging countries. The lack of access to \nfinances is one of the important growth constraints the SMEs face. This \nstudy investigates the firm and country specific determinants of the financial \nconstraint levels of SMEs in selected emerging Western Balkan economies. \nThe main determinants of the financing obstacles examined in the sampled \ncountries were: firm size, ownership type, and age, accounting information \ntransparency, the depth of credit information indexes, the banking sector \nconcentration, property registration costs; and per capita GDP. The findings \nconfirm that firm size is a significant determinant of the financial constraint \nlevels of SMEs in the selected economies. Moreover, we found that older firms \nare financially more constrained in the region. The possible economic \nimplications of the positive association between firm age and financial \nconstraint are discussed. Banking sector concentration level plays crucial role \nin the external financing of SMEs in developing countries. By closely \nexamining the firm characteristics and country-level factors that determine the \ndegree of the financing obstacles faced by SMEs, we observed that in \ndeveloping economies overall institutional and financial problems are more \nimportant than firm-specific

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