Small and Medium Enterprise Financing in Transition Economies

This paper examines the financing status of small and medium enterprises (SMEs) in transition economies. The examination is based on different empirical specifications. First, factors relevant to creating financing obstacles for SMEs are analyzed. These factors are further analyzed to determine whether they influence the financing patterns of firms differently. Second, the analysis focuses on identifying those specific firm-level features and bank regulatory practices that are relevant to SMEs’ access to short-term versus long-term bank loans. The extent to which these factors influence the structure of loans to small business is also analyzed. Given the importance of SMEs for employment and economic growth in countries, this study contributes to better understanding potential obstacles to their ability to obtain funding. It is also the first to explore the impacts of specific bank regulatory practices on lending to SMEs in transition economies. Furthermore, the data that are employed in the empirical analysis allow us to exam three different regulatory regimes over time which makes this study unique as compared to other studies using purely cross-section data