Interactions between business and financial strategies in Serbian companies
We surveyed financial and general managers of 58 companies in Serbia in order to examine their views on the interactions between business and financial strategies. Although the theoretical views are well known and clear, in practice, when there is limited availability of funding sources, a...
Main Authors: | , |
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Format: | Article |
Language: | English |
Published: |
Faculty of Economics, Belgrade
2014-01-01
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Series: | Ekonomski Anali |
Subjects: | |
Online Access: | http://www.doiserbia.nb.rs/img/doi/0013-3264/2014/0013-32641403055K.pdf |
Summary: | We surveyed financial and general managers of 58 companies in Serbia in order
to examine their views on the interactions between business and financial
strategies. Although the theoretical views are well known and clear, in
practice, when there is limited availability of funding sources, a meaningful
combination of business and financial risk can be very difficult. We found
moderate interactions between business and financial strategies. Managers of
companies in Serbia are very aware of the fact that the high volatility of
operating profit suggests that they should limit borrowing. However, ordinary
practical problems in day-to-day operations, such as long periods of
collection of accounts receivable, force the companies to take additional
debt. There are significant differences between the views of managers of
large companies and managers of small businesses on how business strategy
dictates financial strategy. However, firm size is not relevant to the
current level of debt, although earlier decisions on business strategy in
terms of diversification and internationalization are relevant to the level
of leverage. Somewhat surprisingly, the current level of debt does not affect
the intended financial strategy in the sense of the managers’ preferences to
take additional debt to finance possible diversification and
internationalization or other high-risk financially demanding business
strategies. As the pecking order theory advocates, managers have a strong
tendency towards internal financing. |
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ISSN: | 0013-3264 1820-7375 |