Business owner and manager’s attitudes towards financial decision-making and strategic planning: Evidence from Croatian SMEs

Abstract

1.INTRODUCTIONSmall and medium sized companies, as a backbone of the Croatian economy, should create a wide range of financial and management knowledge to serve as a competitive advantage in the process of decision-making. The SME sector contributes to economic development, job creation, to reduction of regional development gaps, and to developing innovative capabilities (Viducic et al., 2013). Business owners' and managers' attitudes in Croatian SMEs companies were explored in the context of their financial decision-making process and strategic planning. The literature and the practice can identify different types of planning important for sustainable business success. Those are financial and strategic planning. The present study has both theoretical and empirical significance. For research purposes, online survey questionnaire was created using Google Documents tool as a measuring instrument for collecting data. In the questionnaire, mostly closed-ended questions were used. Also, the Likert model of the questionnaire has been used, with statements to be rated on a scale from 1 to 5.Data were collected from 106 business owners and managers of SMEs in Croatia. Collected data were analyzed using Microsoft Excel and interpreted using standard tools of descriptive statistics. Analysis revealed that business owners and managers are concerned about financial results, but unfortunately they do not have impact on decision-making from the financial perspective in every phase of the decision-making process. The most influential function they have in the process of financial decision-making is the organizational one which is considered one of the major functions of the management process.The study is organized into three major sections. The first section provides an analytical review of the latest articles about financial decision-making and strategic planning in the small and medium sized companies. The second section turns to the problem of research agendas. A detailed analysis and research results are shown in the measurement development and research results section. Conclusions, limitations and implications for further research are presented in the third section at the end of the paper.2.THEORETICAL BACKGROUND - FINANCIAL DECISIONMAKING AND STRATEGIC PLANNING IN SMESThe analyzed literature (Pasadilla, 2010; Culkin, Smith, 2000) shows that the definition of SMEs is usually based on the number of employees and capital thresholds and that those companies are the largest component of business sector in every global economy. Despite the many problems encountered by SMEs1 in Croatia, the share of these companies in the Croatian economy is also significant and recognizable. (GEM Croatia, 2016).SME sector has the potential to quickly respond to the changes in the context of global environmental change (Shahzad et al., 2010) which is an important dimension for financial decision-making process and strategic planning. The decision-making process in the SMEs typically involves more compelex strategic behavior than is commonly recognized (Reboud, Mazzarol, 2008), and management is often analysed from the qualitative aspect which emphasizes the use of creativity and intuition (Ibicioglu, Kocabiyik, Daglar, 2010). Some other conducted studies (Kraus, Reiche, Reschke, 2007; Kono, Barnes, 2010) show that communication skills, teamwork skills and financial knowledge are very important for strategic decision-making but business owners and managers in SMEs still have an insufficient business knowledge for making financial decisions and performing strategic planning. Financial literacy is important for effective decisions in the running of the business. Recent findings (Klapper, Lusardi & Panos, 2015) suggest that financial literacy exerts a high impact on business performance in the SMEs in the US.Financial management is more focused on organizing function, on collecting financial data and developing financial statements. …