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Edited by Geoffrey Wood and Mehmet Demirbag
Chapter 17: Financial System and Equity Culture Development in Central and Eastern European Countries: The Effect of Institutional Environment
Zita Stone, Fragkiskos Filippaios and Carmen Stoian 17.1 INTRODUCTION The recent economic crisis (that is, the global financial crisis of 2008– 2009) has confirmed that without adequate access to capital, firms in all types of economies suffer. The fact that the financial sector has been unable to provide adequate financing for many firms since 2008–2009 has resulted in corporate standstill or even declared insolvency of some formerly well-performing firms. As a result, most financial analysts and economists agree that the ultimate challenge for any economy at the time of such a serious economic crisis is to restore financial confidence and stability among all financial sector participants (the firms, investors, government and financial institutions), to enable the adequate flow of capital and to facilitate the efficient functioning of different financial systems. Capital finance is essential for firm growth and, by implication, for economic growth (Stoian and Filippaios 2007). This leads to the question of how firms can best finance themselves and what types of financial systems are likely to be formed in the future. This is particularly relevant for countries with historically weak and underdeveloped financial systems, such as the transition countries of Central and Eastern Europe (hereafter CEECs). Limited availability of capital, poor access to finance and low-quality financial institutions form the characteristics of weak financial systems present in the majority of transition countries (Hermes and Lensink 2000). It is clear that without access to stable and adequate financial markets these countries’ ultimate goal of catching up with their...
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