THE NEXUS BETWEEN FINANCIAL TRANSPARENCY AND THE FINANCIAL OBSTACLE LEVEL OF THE ENTERPRISES IN THE WESTERN BALKAN REGION

Abstract

Access to finance plays a crucial role in the growth of small and medium enterprises (SMEs), thus affecting the development of the emerging countries. SMEs, which record their transactions under international accounting standards and use external auditors, finance their growth and working capital through formal external sources (Nizaeva & Coskun, 2018). In addition, the decision-making process of crediting depends particularly on the SMEs’ financial reporting, thus it requires complete transparency of their financial reports. Taking into consideration the important role that financial transparency plays in the access to finance as well as its impact on the SMEs’ growth, the main aim of this paper is to analyze the impact of the financial transparency on the financing obstacles of the SMEs operating in the Western Balkan countries, through the usage of the survey data collected from the 6th Business Environment and Enterprise Survey (BEEPS VI), enabled by European Bank for Research and Development (EBRD) and the World Bank, related to the survey time period 2018–2020. In this regard, probit and ordinary least squares (OLS) techniques have been employed, where the results reveal that financial transparency has a significant negative effect on the financing obstacles of the enterprises of the Western Balkan region. Besides financial transparency, firm-specific factors such as age and size have been included in the model and the findings show that crucial determinants of the financing obstacles these companies have in this region.