1999 | nr 10 Proceedings of the Ace/Phare Conference on Building Financial Institutions in Transition Economies, Poznań, Poland 14-15 May, 1999 | 9--49
Evidence on the Evolution of Corporate Financial Relationships During Enterprise Restructuring in Estonia
This paper presents and analyses some results of the special interview survey of Estonian manufacturing firms undertaken in 1997. The survey was designed to quantitatively measure the state and changes in Estonian business environment, focusing on the key aspects of financial contractual relationships of Estonian manufacturing firms (market environment aspect) as well as the regulation and dispute resolution mechanisms (non-market aspect). Hence, the main motivation of the paper is to disentangle the most important factors influencing business firms financing and investment decisions. It is found that own savings are the main source of firms' start-up financing, but formal or informal loans are also used, about one third of respondent firms reported the usage of informal lending and 24.5% of firms reported the usage of informal borrowing during the previous year. In addition, the evidence suggests that government regulations do not affect seriously Estonian manufacturing firms operating, expansion or closing down the business decisions. The evidence acknowledges the existence of a number of disputes and conflicts between economic agents, but Estonian legislation is not sufficient for resolving these disputes; enforcement mechanism is not well- working so most firms support the usage of self-enforcement mechanisms. It is also noted that Estonian governmental institutions or business associations do not provide business supporting services (information, advice and consulting services). (original abstract)
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