THE INFLUENCE OF THE MACROECONOMIC ENVIRONMENT ON THE FINANCING DECISION IN SMES

Abstract

Small and medium-sized enterprises are considered the engine of economic growth, as they play an important role in a country's economy by significantly contributing to its economic growth and job creation. However, one of the biggest problems SMEs face is the lack of access to finance. Lack of access to finance affects the existence of SMEs and the possibility of their speedy recovery from a crisis. The present study aims to conduct an empirical analysis of the influence of macroeconomic variables on the performance of small and medium enterprises. The study also includes the credit indicator granted to the private sector by banks, to analyze whether SMEs performance is influenced by access to finance, especially in a competitive economy. The main objective of the study is to investigate the determinants for improving the SME’s performance and the impact of access to finance on it among the Member States of the European Union located in south-eastern Europe. The economic theory states that access to finance influences a company's performance. The present study is based on the secondary data on the macroeconomic environment of the states under study and is obtained from the Eurostat and the World Bank. The study is empirical cum qualitative in nature and based on Panel data. The analysis period is 11 years from 2010 to 2020. The data analysis is done with the help of the econometric software “EViews”. The findings of the study indicates that the macroeconomic environment influences the financing decisions of most small and medium- sized enterprises. Also, due to the pandemic of COVID-19, the macroeconomic environment has deteriorated, and access to finance is especially a vital issue for the SME sector. The results confirm that the real GDP growth rate influences the financing decision of SMEs. Considering the vital importance of the SMEs in a country’s economy and the devastating impact of the COVID-19 pandemic on small and medium-sized enterprises, the paper is of high interest in solving the problems of access to finance.