In the countries with developed financial markets, unlike in Bosnia and Herzegovina (BiH) and other emerging market countries (EMCs) with the so called bank-centric financial systems, corporate bonds are a rather significant alternative to the usage of bank loans for financing the development needs of the real sector of the economy (corporate sector). The new architecture of world's financial stability with Basel III as its integral part additionally emphasizes this importance for both banks and companies. Besides, in the countries with developed financial markets it is probably needless to mention the need for high quality debt securities. This is especially true due to the conditions of stronger institutional investors on the market, such as pension funds that can realistically be expected to become the leading financial institutions of the 21 st century, and ever increasing need of institutional investors, funds in particular, for high quality forms of assets and portfolio diversification. In EMCs in which pension reforms have still not been completely implemented or completed, considering a drastic fall in the ratio of the insured based on contribution payment and the number of pensioners, the existing situation is almost non-sustainable. Therefore, the transformation of pension funds in accordance to the two or three pillar structure and the emergence of voluntary pension funds as financially powerful institutional investors have no alternative. Certainly, in terms of corporate bonds and their issue on the one hand, and investing in them on the other, in EMCs and thus also in BiH there are some important aspects to be observed when analyzing their influence on the decisions on financing or investing (liquidity, interest rate level, clarity and implementation of regulations, etc.).
Financial system supports economic growth, while its regulatory framework provides stability for investors. Developing countries with bank-oriented financial systems are not attractive to investors, so prolonged status quo leads to economic deterioration. This is particularly the case with some of the most underdeveloped areas in Europe: Western Balkans. It is essential the developing countries in this region consider steps towards financial liberalization, which will help open the borders for capital flows and attract new investments. The main goal of this paper is to review and present the available information related to the banking system development in Western Balkans in terms of ownership structure, capital adequacy, loan and asset performance, return on investment and liquidity. These indicators should provide a clearer picture of the current financial systems in Western Balkans economies and their development progress -useful for comparison with other developing regions and financial transformation and liberalization efforts.
Throughout almost a century many theories of firm growth, investments, financial leverage and dividend policy have been developed aiming to capture decisive relations among the crucial firm internal potentials. The extensive literature reveals many determinants influencing firm growth. The expectations of the relations among investment activities, financial structures and dividend policy on one hand and firm growth indicators (value, sales volume, employment, return) on the other hand exhibit clear and simple relations. Though most of the theories excerpt all relations and represent state of the art in the internal growth potentials relation, we may find a bunch of counter-expectations findings in the related literature. Namely, affected by specific circumstances firms behave in different ways with suboptimal use of internal growth potentials. Among the specific circumstances that may affect the national economy, transition, post-recession and underdeveloped financial markets deserve particular research attention and focus. In this paper, we present the existing theories overview, potential challenges of the labelled circumstances and a review of the relations between selected corporate finance principles and firm growth indicators. The research reveals the findings based on the extensive firms' dataset related to Bosnia and Herzegovina. The findings of this paper might inspire further research efforts, vivid theoretical debate on the causes and consequences of the findings as well as a clear response from the related government bodies responsible for macro economic development.
The use of fundamental corporate finance principles as well as the combination of their effects does not always contribute to the same performance effects and firms’ growth. It can considerably vary in certain periods, market turbulences and various industries. Referring to the permanent need for exploration of the individual and integrated effects of the corporate finance principles on firms’ growth in specific circumstances, on the one hand, and particular importance of wood industry in Bosnia and Herzegovina (B&H), on the other, in this paper we examine the extent to which corporate finance principles support wood industry growth in B&H. Specifically, the aim of this research is to investigate the contribution of investments, financial leverage and dividend policy to the growth of firms in this particular industry. Furthermore, the compliance of the paper findings with theoretical concepts and expectations of corporate finance principles role arises as the additional research challenge. Finally, we are interested to find out if the empirical results provide a solid base to apply consistent incentives policy that may further stimulate wood industry growth in B&H. We select all wood-processing firms in B&H from 2008 to 2016. Stata 15 is applied in the empirical analyses and calculations.
To liberate or to regulate: balanced approach to bank-oriented financial system transformation in developing countries Abstract A stable, transparent financial system inspires confidence among investors and supports the overall economic growth. Inflexible regulation tends to slow down economic progress, making countries less attractive to investors.Economies with bank-oriented financial systems tend to be less attractive to investors, so their long-term goal is to demonstrate flexibility through liberalization, attracting new investors and ensuring survival in highly competitive and unforgiving global conditions. Liberalization success is even more essential for developing countries and their efforts to open the borders for capital flows and attract new investments. While financial liberalization affects all sectors of the economy and directly influences growth, it does not guaranty it. The removal of financial restrictions could affect capital distribution, increase volatility, create challenges for banks, etc. To support the liberalization efforts, it is very important to understand the nature of banking business, criticality of transparent and effective regulatory framework, as well as the expectations of potential investors.The main goal of this paper is to discuss the process of financial liberalization in developing countries and motivate the policy makers to consider available lessons when creating their balanced approach to financial (de)regulation processes towards financial development and integration in the global financial landscape.
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