Debt as a financial risk factor in SMEs in the Czech Republic

• Authors: Jan Kramoliš , Kamil Dobeš

Abstracts

EN

Research Background: The approach is based on theoretical sources and completed studies on business debt, debt level and repayment awareness and how this issue relates to SMEs in the Czech Republic. Purpose of the article: The main purpose of this paper is to examine the attitude of SMEs towards the issue of company debt and its position within the economy. This attitude is an inherent part of the company´s risk management. Methods: Three researched issues (How strongly is company debt perceived as a financial risk factor; Does the company consider debt to be a serious matter in their business; What measures does the company take to reduce risk) supported by hypotheses, which verified the thesis, were statistically tested. Finding & Value added: Practical implications confirm the thesis that there is a belief that SMEs do not consider debt to be a critical factor of business risk and do not associate it directly with the major risk of business failure. SMEs do not view debt negatively and do not directly link debt to the risk of failure. Consequently, companies consider the risk of indebtedness as relatively insignificant. Their approach to indebtedness is therefore generally passive and they also believe that it will not jeopardize their business, and they will always somehow manage to solve it through insurance, risk avoidance and through creation of financial reserves.

Keywords

EN

risk management; debt awareness; company debt; indebtedness; debt repayment; SMEs

• Publisher: Instytut Badań Gospodarczych
• Journal: Equilibrium. Quarterly Journal of Economics and Economic Policy
• Year: 2020
• Volume: 15
• Issue: 1
• Pages: 87-105

Dates

published

2020

Contributors

author

Jan Kramoliš

• Tomas Bata University in Zlin

• https://orcid.org/0000000216878067

author

Kamil Dobeš

• Tomas Bata University in Zlin

• https://orcid.org/0000000314481936

References

• Aït-Sahalia, Y., & Matthys, F. (2019). Robust consumption and portfolio policies when asset prices can jump. Journal of Economic Theory, 179. doi: 10.1016/ j.jet.2018.09.006.
• Altman, D. G. (1991). Practical statistics for medical research. London: Chapman and Hall.
• Belás, J., Cipovová, E., Novák, P. & Polách, J. (2012). Impacts of the foundation internal ratings based approach usage on financial performance of commercial bank. E+M Ekonomie a Management, 15(3).
• Belás, J., Sopková, G. (2016). A model of entrepreneurial orientation. Transformation in Business & Economics, 15(2B).
• Berger, A. N., & Frame, W. S. (2007). Small business credit scoring and credit availability. Journal of Small Business Management, 45(1). doi: 10.1111/j.1540 -627x.2007.00195.x.
• Berger, A. N., &Udell, G. F. (2006). Small business and debt finance. In International handbook series on entrepreneurship. Boston: Springer. doi: 10.1007/0-387-24519-7_13.
• Bliss, R. R. (2001). Market discipline and subordinated debt: a review of some salient issues. Economic Perspectives-Federal Reserve Bank of Chicago, 25(1).
• Briys, E., & De Varenne, F. (1997). Valuing risky fixed rate debt: an extension. Journal of Financial and Quantitative Analysis, 32(2).
• Brown, J. A., & Forster, W. R. (2013). CSR and stakeholder theory: a tale of Adam Smith. Journal of Business Ethics, 112(2).
• Burianová, L., & Paulík, J. (2014). Corporate social responsibility in commercial banking - a case study from the Czech Republic. Journal of Competitiveness, 6(1). doi: 10.7441/joc.2014.01.04.
• Çera, G., Belás, J., & Strnad, Z. (2019). Important factors which predict entrepreneur’s perception in business risk. Problems and Perspectives in Management, 17(2). doi: 10.21511/ppm.17(2).2019.32.
• Clopper, C, & Pearson, E. S. (1934). The use of confidence or fiducial limits illustrated in the case of the binomial. Biometrika, 26.
• Cressy, R. (1996). Are business startups debt-rationed? Economic Journal, 106(438).
• Derban, W. K., Binner, J. M., & Mullineux, A. (2005). Loan repayment performance in community development finance institutions in the UK. Small Business Economics, 25(4).
• Deyoung, R., Gron, A., Torna, G., & Winton, A. (2015). Risk overhang and loan portfolio decisions: small business loan supply before and during the financial crisis. Journal of Finance, 70(6). doi: 10.1111/jofi.12356.
• Faria, G., & Correia-da-Silva, J. (2014). Is stochastic volatility relevant for dynamic portfolio choice under ambiguity? European Journal of Finance, 22(7). doi: 10.1080/1351847x.2014.958511.
• Field, E., Pande, R., Papp, J., & Rigol, N. (2011). Debt structure, entrepreneurship, and risk: evidence from microfinance. Retrieved from: https://pdfs.semantics cholar.org/10fc/f159009fe849e917fe87a7f3e2bfa28c980f.pdf.
• Fisher, I. (1930). Theory of interest: as determined by impatience to spend income and opportunity to invest it. Clifton: Augustusm Kelly Publishers.
• Fleiss, J. L., Levin, B., & Paik, M. C. (2003). Statistical methods for rates and proportions. Hoboken: John Wiley & Sons.
• Frame, W. S., Srinivasan, A., & Woosley, L. (2001). The effect of credit scoring on small-business lending. Journal of Money, Credit and Banking, 33(3). doi: 10.2307/2673896.
• Hargreaves, B. R., & McWilliams, T. P. (2010). Polynomial trend line function flaws in Microsoft Excel. Computational Statistics & Data Analysis, 54(4). doi: 10.1016/j.csda.2009.10.020.
• Hovakimian, A., Opler, T., & Titman, S. (2001). The debt-equity choice. Journal of Financial and Quantitative analysis, 36(1).
• Hudakova, M., Masar, M., Luskova, M., Patak, M. R. (2018). The dependence of perceived business risks on the size of SMEs. Journal of Competitiveness, 10(4). doi: 10.7441/joc.2018.04.04.
• Hvolkova, L., Klement, L., Klementova, V., & Kovalova, M. (2019). Barriers hindering innovations in small and medium-sized enterprises. Journal of Competitiveness, 11(2). doi: 10.7441/ joc.2019.02.04.
• Izzo, M. F., & Magnanelli, B. S. (2012). Does it pay or does firm pay? The relation between CSR performance and the cost of debt. SSRN Electronic Journal. doi: 10.2139/ssrn.1986131.
• Ključnikov, A., Kozubíková, L., & Sopková, G. (2017). The payment discipline of small and medium-sized enterprises. Journal of Competitiveness, 9(2). doi: 10.7441/joc.2017.02.04.
• Kotey, B. (1999). Debt financing and factors internal to the business. International Small Business Journal: Researching Entrepreneurship, 17(3). doi: 10.1177/ 0266242699173001.
• Longstaff, F. A., & Schwartz, E. S. (1995). A simple approach to valuing risky fixed and floating rate debt. Journal of Finance, 50(3). doi: 10.1111/j.1540-6261.1995.tb04037.x.
• Malkoc, S. A., & Zauberman, G. (2018). Psychological analysis of consumer intertemporal decisions. Consumer Psychology Review. doi: 10.1002/arcp.1048.
• Pescatori, A., Sandri, D., & Simon, J. (2014). Debt and growth: is there a magic threshold? International Monetary Fund.
• Rahman, A., Belas, J., Kliestik, T., & Tyll, L. (2017). Collateral requirements for SME loans: empirical evidence from the Visegradcountries. Journal of Business Economics and Management, 18(4). doi: 10.3846/16111699.2017.135 7050.
• Rahman, A., Rozsa, Z., & Cepel, M. (2018). Trade credit and bank finance – evidence from the Visegrad Group. Journal of Competitiveness, 10(3). doi: 10.7441/joc.2018.03.09.
• Roush, P. B., Mahoney, L. S., & Thorne, L. (2012). The effects of public pressure on CSR behavior in a capital market experiencing excessive moral debt. Accounting and the Public Interest, 12(1). doi: 10.2308/apin-10233.
• Smejkal, V., & Rais, K. (2003). Řízenírizik. Prague: Grada Publishing.
• Taraba, P., Hart, M., & Pitrova, K. (2016). Risk management of projects in the Czech Republic. Polish Journal of Management Studies, 13(1). doi: 10.17512/ pjms.2016.13.1.17.
• Van der Wijst, N., & Thurik, R. (1993). Determinants of small firm debt ratios: an analysis of retail panel data. Small Business Economics, 5(1). doi: 10.1007/ bf01539318.
• Virglerová, Z., Homolka, L., Smrčka, L., Lazányi, K., & Klieštik, T. (2017). Key determinants of the quality of business environment of SMEs in the Czech republic. E a M: Ekonomie a Management, 20(2). doi: 10.15240/tul/001/2017-2-007.
• Virglerová, Z., Kozubíková, L., & Vojtovič, S. (2016). Influence of selected factors on financial risk management in SMEs in the Czech Republic. Montenegrin Journal of Economics, 12(1). doi: 10.14254/1800-5845/2016.12-1.1.
• Wu, Z., Hedges, P. L., & Zhang, S. (2007). Effects of concentrated ownership and owner management on small business debt financing. Journal of Small Business Management, 45(4). doi: 10.1111/j.1540-627x.2007.00221.x.

Identifiers

DOI

10.24136/eq.2020.005

Biblioteka Nauki

22444435