Financial Constraints of the Pro-environmentally Oriented Firms in the Covid-19 Crisis

Abstract

Environmentally oriented firms are more pressed for resources in general, especially during periods of economic downturn. Since their business plans are frequently more innovative, they are perceived as riskier by financial institutions. Furthermore, the recent global COVID-19 crisis was not primarily related to financial disruptions, and most governments provided generous and widespread support to different segments of their economies. However, the evidence on the degree to which firms were faced with access to finance problems during this crisis is still scarce. This paper aims to explore the extent to which environmentally-oriented firms in post-transition economies are disproportionally affected by the financial constraints related to the market disruptions caused by COVID-19 pandemics compared to non-environmentally oriented firms. The World Bank Enterprise Survey 2019 has been used to investigate this issue. Based on this data source, an indicator of firm environmental proactivity is developed. The firms’ financial constraints in the pandemic period are evaluated based on the responses from the three survey rounds of the World Bank COVID-19 follow-up enterprise survey, covering different stages of the pandemic. The post-transition countries in the analysis are heterogeneous, consisting of both EU members (Bulgaria, Croatia, Slovakia, and Slovenia) and EU accession countries (Bosnia and Herzegovina and Serbia). The lowest percentage of firms having an environmental strategy was found in Croatia, while the highest percentage is in Slovenia. Based on the results, it can be concluded that firms adopting environmental strategies in analyzed countries mostly follow regulations and/or chose low-cost measures.
 Keywords: financial constraints, pro-environmental orientation, post-transition, COVID- 19