Business funding sources during the financial crisis: supply-side and demand-side factors. Case study of Greece
Journal Title: Central European Review of Economics and Finance - Year 2016, Vol 11, Issue 1
Abstract
The objective of this study is to present the evolution of the financing of Greek enterprises during the years of crisis, and in particular analyze the impact of the crisis on companies' access to external financing. The deep economic crisis that hit Greece is reflected, inter alia, in the main macroeconomic ratios, like Gross Domestic Product and unemployment and some indicators of the banking sector, like deposits, total loans and non-performing loans. Greece is characterizes today by borrowing problems, high public debt, serious lack of competitiveness, unsustainable social security system, particularly poor public administration and a large and wasteful public sector. Economic crisis decreased firms' profitability and increased their needs for external sources of financing. In the situation when internal sources are limited external capital is the main source allowing to finance firm's investment projects. Insufficient availability of external capital can restrict future firm's growth opportunities and its competitiveness. In this paper we analyze two main sides of the problem of business financing: the supply and demand of external capital. The extreme reluctance of banks to lend Greek companies because of the strict financing constrains due to the national debt crisis exacerbates the cycle of economic recession and seriously undermines the efforts of Greek companies to continue their activities. In new circumstances banks try to limit risk. But in the current environment they have trouble finding creditworthy borrowers. As a result the credit market is very constrained. On the other side economic crisis decreased firms' profitability and increased needs in finding ways to gain funds. The analysis shows that small and medium enterprises have been particularly affected by tighter credit conditions and financial instability. Debt financing has become more expensive and difficult to obtain.(original abstract)
Authors and Affiliations
Alina Hyz, Grigorios Gikas
Keywords
Related Articles
- EP ID EP209821
- DOI -
- Views 66
- Downloads 0
An estimate of the impacts of the Bank of England’s quantitative easing programme on UK economic growth
This paper reviews the reasons for and impacts of quantitative easing by the Bank of England. It analyses the macroeconomic impacts of this policy tool on the UK economy across the period 2008-16. It compares the impac...
Analyzing changes in international competitiveness position of Visegrad Group vis-a-vis EU-15 after the crisis 2007 as measured by RCA Index
The aim of this paper is to find out whether financial crisis of 2007-8 has changed the Visegrad Group - V-4 competitiveness position vis-a-vis EU-15. As we know the countries of Central Eastern Europe forming the so cal...
Stakeholder prioritizing in the midst of an economic crisis: A multi-firm, multi-sector study
The purpose of this study is to identify the patterns of Corporate Social Responsibility (CSR) activities, in adverse economic circumstances, so as to understand the importance ascribed by the companies to each of their...
Causes of innovativeness of Polish enterprises
Defi ning innovation remains problematic as it is associated with such notions as creativity or change. Some economists link innovation with any change, though a majority of analysts and practitioners look for innovation...
Problems with fulfilment of stabilization pact in the face of the financial crisis of the Eurozone
The main aim of the rules of fiscal policy of European Union is to identify and limit the negative impact of wrong policies of some of the member states on the functioning of the remaining countries of the Eurozone. In o...