Serbian Business Research Articles

Testing the models for detection of earnings management

In this paper authors analyze the predictive power of existing models for the detection of earnings management of the companies in countries around the world. In addition, based on a representative sample of companies in the industrial sector of the Republic of Serbia, they tend to develop an improved model for the detection of manipulative financial reporting, which will be suitable for the Serbian business environment by using multiple linear regression. The application of existing models of discretionary accruals in the Serbian economic environment shows that these predictive models do not have sufficient explanatory power (Jones model 5.4%; Dechow model 2.6%; Kasznik model 37%), and there is a need for their further modifications. From these models, only Kasznik model proved to be statistically significant model for the sample of 65 companies in the industrial sector of the Republic of Serbia. As a result of the research, a modified model of discretionary accruals has been developed, which has improved explanatory power and which allows detection of new techniques of manipulation of financial reporting in the industrial sector of the Republic of Serbia. The explanatory power of our modified model is 63.7%.

The role of career adaptability in predicting entrepreneurial intentions: A moderated mediation model

Guided by the Career Construction Theory (Savickas, 2013), we view entrepreneurship as an adaptive vocational behavior driven by an individual's self-regulatory capacity to thrive in a complex entrepreneurial career context. Our research model posited that individuals rely on their adaptive resources and entrepreneurial self-efficacy as they form entrepreneurial intentions. Career adaptability, as self-regulatory competencies, is further strengthened by prior exposure to family business. We collected data over three measurement periods from Serbian business students (n=380) and validated the Career Adapt-Abilities Scale (CAAS). The moderated mediation model was supported and as predicted: (a) career adaptability was positively associated with entrepreneurial intentions and (b) the mediated relationship between career adaptability and entrepreneurial intentions via entrepreneurial self-efficacy was stronger for individuals with prior exposure to family business. In addition, we provide evidence for the psychometric properties of CAAS by examining its internal consistency, test–retest reliability, and factor structure. Taken together, our study offers the groundwork for understanding successful adaptation in the entrepreneurial career context and supports the cross-national measurement equivalence and utility of CAAS in a developing economy.

Determinants of business performance of non-life insurance companies in Serbia

The possibilities for growth of the insurance sector and its contribution to the development of the national economy are conditioned by business performance of insurance companies. This paper presents results of the assessment of performance of companies engaged in non-life insurance business in Serbia. Empirical research was conducted on the basis of financial statements of non-life and composite insurers during the period 2006-2013 by using CARMEL indicators and multiple regression analysis. The estimated model with individual fixed effects on panel data indicates a significant and negative influence of the combined ratio, financial leverage and retention rate on the profitability of non-life insurers, as measured by the return on assets (ROA), while the influence of the written premium growth rate, return on investment and company size is significant and positive. Conducted research enriches the information basis for the creation of business strategy and formulation of business policy of non-life insurers in Serbia.

Agricultural insurance under the Solvency II Directive

Solvency II Directive represents a new framework of unique solvency regulation of insurance and reinsurance companies in the European Union. Although it has not yet been implemented in national legislations, it can be concluded, based on the directive wording and conducted quantitative studies, that it will have implications on agricultural producers since they are the users of insurance services. The aim of the research presented in this paper is to analyse the implications of the new directive to agricultural producers since they are the insureds and the main actors of agribusiness. Firstly, the paper gives an overview of the basic features of the new regulatory framework and then it points at the issues and the needs for intensive application of Directive in order to improve the insurance business in Serbia. The process will direct the settlement of major claims, the ones that are typical of catastrophic risks in agriculture, towards the insurance, while the expectations from the government will be directed towards the regulation of the setting and economic measures (development and investment subsidies, cooperative movement). In addition, the paper points at the demands of the new regulation and analyses the implications of the new regulation regarding the settlement of claims resulting from major flood since it represents the example that proves the basic postulate.

The role of venture capital in economic transition in Serbia

Venture and more broadly private equity finance is in early stage development in Serbia, both in form of seed-capital financing for innovative small and medium size enterprises (SME) and private equity financing in growing companies. Banking dominates as a source of finance with significant drawbacks in terms of cost and required collateral, especially hampering potential growth of SMEs that constitute 99% of all businesses in Serbia. This article finds private equity investments made to date to have demonstrated positive results, confirming data from other, especially transition economies, presented in the introductory literature overview. In the mid-term, Serbia stands to benefit both from entrepreneurial private ventures and important regional initiatives supported by the European Union such as the Western Balkan Enterprise Development and Innovation Facility, whose innovation and expansion investment funds are expected to start operations in 2014. Serbia is also eligible for the new EU Programme for the Competitiveness of Enterprises and SMEs (COSME), which will have an equity facility, stimulating venture capital stream for SMEs. Education of local financial institutions and SMEs in Serbia about venture capital and investor readiness will be vital, facilitating the construction of project pipelines. In conjunction, the legal framework should be upgraded, both by enacting the amendments to the Law on the Export-Credit Agency (AOFI) and the Law on venture capital funds, accompanied by wider regulatory reform to improve the business climate and foster entrepreneurship.

The Analysis of Key Challenges and Constraints to the Stability and Growth of an Entrepreneurial Sector in Serbia

Macroeconomic business conditions in Serbia are still quite unfavourable in the post-recession period. Data submitted by the Serbian Business Registers Agency show that the number of newly established entrepreneurs in Serbia, in 2010, is for the first time less than the number of those that have gone out of business over that year. These data were the basis for the analysis of constraints and factors that brought about this situation. The high mortality rate of entrepreneurial ventures indicates the presence of a large number of problems that limit the development of entrepreneurship in Serbia. A survey carried out on entrepreneurs and managers of small and medium enterprises (SMEs) by the Republic Agency for Development of small and medium enterprises and entrepreneurs (SMEEs) revealed key constraints for their expansion, such as: lack of financial resources, administrative obstacles, insufficient qualified labour, lack of information on markets and technologies, non-compliance with standards and other less significant issues. Therefore, the objective of the paper is to stress the influence of the major problems and restrictions to the development of the entrepreneurial sector in Serbia. Constraints to the growth of entrepreneurship are going to be perceived through the prism of (insufficient) financial investments that the government makes to overcome them. In addition, by statistical analysis methods, it will be tested whether and to what extent each of these factors affect the number of start-ups. Based on the results, certain recommendations to the economic policymakers will be given.

Transnational entrepreneurship: Experiences of migrant-returnees to Serbia

There is a lack of studies on transnational entrepreneurship in Serbia, while transnational cross-border economic activities of Serbian migrants have so far been perceived mostly from the perspective of foreign remittances. The aim of this paper is to highlight the need to study transnational forms of economic activity in Serbia; identify transnational entrepreneurship among migrants-returnees in Serbia, as well as among those who maintain contacts and have business activities with Serbia; explore motives of respondents related to establishing businesses in Serbia, and simultaneously having business activities abroad. The first part of the paper provides an overview of relevant theoretical standings in the area of transnational entrepreneurship, emphasising the need to combine economic and sociological approaches. The second part analyses the results of a pilot study conducted through interviews on the characteristics of transnational entrepreneurship of migrants-returnees in Serbia. The study results show how respondents use the opportunities and overcome obstacles related to conditions for business activities in Serbia, as they represent an important resource in the development of the Serbian economy.

Social networks: Networks of old school ties

In this article we examine if the term 'old school ties' is applicable in analyzing of Serbian business elite networking. The starting assumption is that business success depends on the level of sociocultural homogeneity of a group of successful individuals. Data from an empirical research conducted in 2012 on a sample of economic elite, showed that such assumption was grounded, but that the group homogeneity could originate from different sources. The first source is primary socio-cultural milieu which includes peer similarities, growing up in similar family environments and attending the same schools. This milieu is the closest to the term 'old school ties' in its usual meaning. Beside these, there are various kinds of secondary milieus, some of the most important ones being the class habitat. This research shows that class affiliation and profession, in particular, have the biggest impact on forming of networks that contribute to business success. The results also show that there are significant differences between members of business elite and lower social layers in relation to this issue. The lower a social layer is on the social ladder, the more important home origin becomes. Today, nationality and religious affiliation are not that important for creation of business networks.

Intellectual capital and corporate performance of MNCs in Serbia

PurposeThe purpose of this paper is to empirically investigate if intellectual capital (IC) has an impact on organizational performance as well as to identify the IC components that may be the drivers of the traditional indicators of business success. The study sought evidence from the multinational companies which conduct their business in Serbia.Design/methodology/approachBy using data from 37 multinational companies which established their business in Serbia from 2006 to 2008 and applying the VAIC methodology for generating independent variables which reflect IC, regression models were constructed to examine the relationships between the efficient use of MNCs' human and structural capital and corporate performance measures: return on assets, return on equity and productivity.FindingsThe results of this study reveal that human capital is positively associated with all three corporate performance measures. The hypothesis regarding a positive association between structural capital and MNCs' profitability and productivity has been confirmed only partially since the results indicate that the structural capital variable shows a statistically significant and positive relationship only with the performance measure ‐ return on equity.Originality/valueThis is the first empirical study conducted in Serbia testing the relationship between IC and organizational performance. It contributes to the existing IC literature by giving new insights into the IC of MNCs' subsidiaries established in Serbia and its relationship with their business performance.

The impact of currency clause and exchange rate on Serbian economy

In nineties Serbia survived the disintegration of the former Yugoslavia, intense UN sanctions, and 1999 78 days of bombing by NATO. This has resulted in a drop in production and hyperinflation. The confidence in the national currency the dinar has been lost. In order to do business in Serbia returned to normal framework the Law on Foreign Exchange imposed the possibility of nomination the loans in foreign currencies. This prompted the business, but it meant a de facto legalization of dual currency system. The logical consequence was the high degree of dollarization. It is important to mention that the dual currency system limited the possibilities of monetary policy of the National Bank of Serbia. Dollarization after the first positive results showed their expected bad sides. Appreciation of the dinar was one of the consequences. The trade deficit and foreign debt grew. Due to the appreciation production rate remained at 40% of its 1989 level, and unemployment has risen to 27%. The benefit of the appreciation had only importers and foreign-owned banks. They take out the capital abroad. Therefore, it is necessary to make changes to the Foreign Exchange Law and abolish foreign currency clause at least for a new loans.

Free Enterprise and Entrepreneurship in Serbia: An Analysis of Motivations, Financing and Obstacles

Problem statement: Entrepreneurship is considered to be a major driving force to economic development throughout the world. Free enterprise is challenging in any country, especially in a developing nation such as Serbia where communism and socialism prevailed for decades. The purpose of this study is to examine entrepreneurship and free enterprise in Serbia as well as the challenges or obstacles they face. The hope is to understand how Serbian entrepreneurs operate in their nation, especially since little is known about them. Approach: A questionnaire was designed and distributed to a sample of Serbian entrepreneurs. Descriptive statistics were calculated based on responses from participants. The study investigates 59 entrepreneurs; identifying commonalities in funding, motivation behind entrepreneurship and common challenges they face. Underlying similarities or differences are examined. Results: Empirical evidence indicates that the majority of Serbian entrepreneurs rely on equity funding to finance their ventures, form businesses to pursue personal freedom, bootstrap their nascent firms and provide services or represent/sell someone else’s products rather than create their own. Results indicate that the greatest challenges to Serbian business owners are with administrative issues associated with their government, political instability and economic uncertainty. Analogous to the USA, Serbian entrepreneurs create business for freedom, independence and monetary gain. Conclusion: The overall results of the study confirm the benefit of entrepreneurship in the transitioning economy, while highlighting the many obstacles that entrepreneurs face. Results indicate that entrepreneurship in Serbia is gaining interest due to the belief that it promotes a better life. Political instability, uncertainty about the future, difficulty obtaining clients and general inexperience pose the greatest threats to Serbian business owners. As entrepreneurship continues to expand in Serbia, they will have greater impact on the local and European economy. Any shifts or changes occurring in entrepreneurship should be examined closer in the future.

Analysis of Electronic Commerce Adoption in Serbia

In order to promote economic growth and social development Serbia must generate and exploit new economic opportunities through the adoption of e-business practices. E-business plays an important role in advancing the Information Society for two reasons: (a) it expands the use of information and communication technology with the objective of enhancing efficiency and decreasing the cost of doing business; and (b) it increases the linkages and interdependence among computerized networks of private and public organizations involved in internal and international economic activities, thus moving from interaction of atomistic actors to an integrated system of information flow management. In this paper we examine the current state of e-business in Serbia, and try to identify the key gaps, and obstacles, for e-business implementation in a country in transition which is in less advanced position compared to Western Europe. The collected data are presented by using SWOT analysis with the view to portray the situation of e-business adoption in Serbia having in mind that this process cuts across a broad range of technical, legal, economic and institutional issues. The most important objective of this article is to point out the key technical and non-technical restraints for development of electronic business in Serbia. Electronic sale of goods and services in Serbia still represent a small fraction of business and economic activity, but in this moment in history it seems that development of electronic business activity will bring comprehensive changes to life style of the people. It is widely expected that Internet as disruptive technology in the forthcoming period will continue to change the traditional business activities, business models and business strategies in Serbia.