Impact of the Financial Structure on the Efficiency of Entrepreneurs in Serbia

The development of entrepreneurship has been very important for the economic growth of most countries in the world, in the recent years. However, starting up new business and its development to a successful stable organization is faced with a number of problems and limitations. Financing is a very serious problem for the countries in transitions. Surveys, conducted in Serbia by the National Agency for Regional Development, have shown that Serbian entrepreneurs have been faced with a number of financial problems which have directly affected their efficiency. This paper investigated whether the problems in financial management (especially problems that depend on the changes to financial structure) had a major impact on the efficiency of entrepreneurs in Serbia. The aim of this paper was to identify the key financial problems that entrepreneurs in Serbia were facing with in the previous period and propose actions whose implementation may lead to their reduction or elimination in the future. Using a sample of more than 13000 entrepreneurs in Serbia (based on the data from the Serbian Business Registers Agency) in the period from 2004 to 2014, we found that extremely large impact on the efficiency of entrepreneurs in Serbia had big financial expenses and a high level of financial risk. Applying the correlation analysis we showed that the growth of long-term debt and related financial expenses caused the reduction of efficiency of entrepreneurs in Serbia. Regression analysis showed that the increase in indebtedness significantly contributed to the increase in inefficiency and bankruptcy of large number of entrepreneurs in Serbia